Correlation Between Prudential Jennison and Essex Environmental

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

By analyzing existing cross correlation between Prudential Jennison International and Essex Environmental Opportunities, you can compare the effects of market volatilities on Prudential Jennison and Essex Environmental 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 Essex Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Essex Environmental.

Diversification Opportunities for Prudential Jennison and Essex Environmental

0.14

Correlation Coefficient

Prudential Jennison  Essex Environmental

Average diversification

The 3 months correlation between Prudential and Essex is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Internatio and Essex Environmental Opportunit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essex Environmental 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 International are associated (or correlated) with Essex Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essex Environmental has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Essex Environmental go up and down completely randomly.

Pair Corralation between Prudential Jennison and Essex Environmental

Assuming the 90 days horizon Prudential Jennison International is expected to under-perform the Essex Environmental. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Jennison International is 1.11 times less risky than Essex Environmental. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Essex Environmental Opportunities is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,332  in Essex Environmental Opportunities on August 31, 2024 and sell it today you would earn a total of  126.00  from holding Essex Environmental Opportunities or generate 9.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Prudential Jennison Internatio  vs.  Essex Environmental Opportunit

Prudential Jennison

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Jennison International 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.

Essex Environmental

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Essex Environmental Opportunities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Essex Environmental may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Prudential Jennison and Essex Environmental

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

The idea behind Prudential Jennison International and Essex Environmental Opportunities 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.