Correlation Between Capital Income and Pgim Jennison

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

By analyzing existing cross correlation between Capital Income Builder and Pgim Jennison Diversified, you can compare the effects of market volatilities on Capital Income and Pgim 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 Capital Income with a short position of Pgim Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Pgim Jennison.

Diversification Opportunities for Capital Income and Pgim Jennison

0.11

Correlation Coefficient

Capital Income  Pgim Jennison

Average diversification

The 3 months correlation between Capital and Pgim is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Pgim Jennison Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pgim Jennison Diversified and Capital Income 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 Capital Income Builder are associated (or correlated) with Pgim Jennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pgim Jennison Diversified has no effect on the direction of Capital Income i.e., Capital Income and Pgim Jennison go up and down completely randomly.

Pair Corralation between Capital Income and Pgim Jennison

Assuming the 90 days horizon Capital Income is expected to generate 14.16 times less return on investment than Pgim Jennison. But when comparing it to its historical volatility, Capital Income Builder is 3.14 times less risky than Pgim Jennison. It trades about 0.04 of its potential returns per unit of risk. Pgim Jennison Diversified is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,154  in Pgim Jennison Diversified on September 13, 2024 and sell it today you would earn a total of  78.00  from holding Pgim Jennison Diversified or generate 3.62% return on investment over 90 days.

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

Capital Income Builder  vs.  Pgim Jennison Diversified

Capital Income Builder

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pgim Jennison Diversified

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pgim Jennison Diversified are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pgim Jennison may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capital Income and Pgim Jennison

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

The idea behind Capital Income Builder and Pgim Jennison Diversified 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.