Correlation Between Prudential Jennison and Prudential 60/40

Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Prudential 60/40 at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Prudential Jennison and Prudential 60/40 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prudential Jennison Small and Prudential 6040 Allocation, you can compare the effects of market volatilities on Prudential Jennison and Prudential 60/40 and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Prudential Jennison with a short position of Prudential 60/40. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Prudential 60/40.

Diversification Opportunities for Prudential Jennison and Prudential 60/40

0.92

Correlation Coefficient

Prudential Jennison  Prudential 60/40

Almost no diversification

The 3 months correlation between PRUDENTIAL and PRUDENTIAL is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Small and Prudential 6040 Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential 6040 Allo and Prudential Jennison is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Prudential Jennison Small are associated (or correlated) with Prudential 60/40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential 6040 Allo has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Prudential 60/40 go up and down completely randomly.

Pair Corralation between Prudential Jennison and Prudential 60/40

Assuming the 90 days horizon Prudential Jennison Small is expected to generate 2.17 times more return on investment than Prudential 60/40. However, Prudential Jennison is 2.17 times more volatile than Prudential 6040 Allocation. It trades about 0.2 of its potential returns per unit of risk. Prudential 6040 Allocation is currently generating about 0.19 per unit of risk. If you would invest  2,324  in Prudential Jennison Small on September 4, 2024 and sell it today you would earn a total of  284.00  from holding Prudential Jennison Small or generate 12.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Prudential Jennison Small  vs.  Prudential 6040 Allocation

Prudential Jennison Small

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Small are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking indicators, Prudential Jennison may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Prudential 6040 Allo

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential 6040 Allocation are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Prudential 60/40 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Jennison and Prudential 60/40

The main advantage of trading using opposite Prudential Jennison and Prudential 60/40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Prudential 60/40 can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Prudential 60/40 will offset losses from the drop in Prudential 60/40's long position.

The idea behind Prudential Jennison Small and Prudential 6040 Allocation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.