Correlation Between Prudential Jennison and Nexpoint Real

Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Nexpoint Real 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 Nexpoint Real 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 Nexpoint Real Estate, you can compare the effects of market volatilities on Prudential Jennison and Nexpoint Real 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 Nexpoint Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Nexpoint Real.

Diversification Opportunities for Prudential Jennison and Nexpoint Real

0.23

Correlation Coefficient

Prudential Jennison  Nexpoint Real

Modest diversification

The 3 months correlation between Prudential and Nexpoint is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Internatio and Nexpoint Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexpoint Real Estate 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 Nexpoint Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexpoint Real Estate has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Nexpoint Real go up and down completely randomly.

Pair Corralation between Prudential Jennison and Nexpoint Real

Assuming the 90 days horizon Prudential Jennison International is expected to generate 0.92 times more return on investment than Nexpoint Real. However, Prudential Jennison International is 1.09 times less risky than Nexpoint Real. It trades about 0.04 of its potential returns per unit of risk. Nexpoint Real Estate is currently generating about -0.02 per unit of risk. If you would invest  2,607  in Prudential Jennison International on October 22, 2024 and sell it today you would earn a total of  530.00  from holding Prudential Jennison International or generate 20.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

Prudential Jennison Internatio  vs.  Nexpoint Real Estate

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.

Nexpoint Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexpoint Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Nexpoint Real 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 Nexpoint Real

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

The idea behind Prudential Jennison International and Nexpoint Real Estate 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.