Correlation Between Prudential Jennison and Stone Ridge

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

Diversification Opportunities for Prudential Jennison and Stone Ridge

-0.49

Correlation Coefficient

Prudential Jennison  Stone Ridge

Very good diversification

The 3 months correlation between Prudential and STONE is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Internatio and Stone Ridge High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge High 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge High has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Stone Ridge go up and down completely randomly.

Pair Corralation between Prudential Jennison and Stone Ridge

Assuming the 90 days horizon Prudential Jennison International is expected to under-perform the Stone Ridge. In addition to that, Prudential Jennison is 1.31 times more volatile than Stone Ridge High. It trades about -0.04 of its total potential returns per unit of risk. Stone Ridge High is currently generating about 0.09 per unit of volatility. If you would invest  907.00  in Stone Ridge High on September 2, 2024 and sell it today you would earn a total of  36.00  from holding Stone Ridge High or generate 3.97% return on investment over 90 days.

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

Prudential Jennison Internatio  vs.  Stone Ridge High

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.

Stone Ridge High

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge High are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Stone Ridge 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 Stone Ridge

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

The idea behind Prudential Jennison International and Stone Ridge High 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.