Correlation Between Sp Midcap and Prudential Jennison

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

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

Diversification Opportunities for Sp Midcap and Prudential Jennison

-0.36

Correlation Coefficient

Sp Midcap  Prudential Jennison

Very good diversification

The 3 months correlation between SPMIX and Prudential is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index and Prudential Jennison Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Sp Midcap 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 Sp Midcap 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 Sp Midcap i.e., Sp Midcap and Prudential Jennison go up and down completely randomly.

Pair Corralation between Sp Midcap and Prudential Jennison

Assuming the 90 days horizon Sp Midcap Index is expected to under-perform the Prudential Jennison. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sp Midcap Index is 1.24 times less risky than Prudential Jennison. The mutual fund trades about -0.34 of its potential returns per unit of risk. The Prudential Jennison Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,667  in Prudential Jennison Growth on September 29, 2024 and sell it today you would earn a total of  159.00  from holding Prudential Jennison Growth or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Sp Midcap Index  vs.  Prudential Jennison Growth

Sp Midcap Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sp Midcap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Prudential Jennison

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Growth are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Jennison may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sp Midcap and Prudential Jennison

The main advantage of trading using opposite Sp Midcap and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Midcap 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 Sp Midcap Index and Prudential Jennison Growth 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.