Correlation Between Power Dividend and Prudential Jennison

Can any of the company-specific risk be diversified away by investing in both Power Dividend and Prudential Jennison 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 Power Dividend and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power Dividend Index and Prudential Jennison Financial, you can compare the effects of market volatilities on Power Dividend and Prudential Jennison 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 Power Dividend with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Dividend and Prudential Jennison.

Diversification Opportunities for Power Dividend and Prudential Jennison

0.8

Correlation Coefficient

Power Dividend  Prudential Jennison

Very poor diversification

The 3 months correlation between Power and Prudential is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Power Dividend Index and Prudential Jennison Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Power Dividend 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 Power Dividend Index are associated (or correlated) with Prudential Jennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Jennison has no effect on the direction of Power Dividend i.e., Power Dividend and Prudential Jennison go up and down completely randomly.

Pair Corralation between Power Dividend and Prudential Jennison

Assuming the 90 days horizon Power Dividend Index is expected to generate 1.06 times more return on investment than Prudential Jennison. However, Power Dividend is 1.06 times more volatile than Prudential Jennison Financial. It trades about -0.07 of its potential returns per unit of risk. Prudential Jennison Financial is currently generating about -0.4 per unit of risk. If you would invest  948.00  in Power Dividend Index on October 15, 2024 and sell it today you would lose (23.00) from holding Power Dividend Index or give up 2.43% of portfolio value over 90 days.

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

Power Dividend Index  vs.  Prudential Jennison Financial

Power Dividend Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Dividend Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Power Dividend is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Jennison

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Jennison Financial has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Jennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Power Dividend and Prudential Jennison

The main advantage of trading using opposite Power Dividend and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Dividend position performs unexpectedly, Prudential Jennison 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 Jennison will offset losses from the drop in Prudential Jennison's long position.

The idea behind Power Dividend Index and Prudential Jennison Financial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.