Correlation Between Technology Ultrasector and Prudential Jennison

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

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

Diversification Opportunities for Technology Ultrasector and Prudential Jennison

0.82

Correlation Coefficient

Technology Ultrasector  Prudential Jennison

Very poor diversification

The 3 months correlation between Technology and Prudential is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Technology Ultrasector Profund and Prudential Jennison Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Technology Ultrasector 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 Technology Ultrasector Profund 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 Technology Ultrasector i.e., Technology Ultrasector and Prudential Jennison go up and down completely randomly.

Pair Corralation between Technology Ultrasector and Prudential Jennison

Assuming the 90 days horizon Technology Ultrasector Profund is expected to generate 1.58 times more return on investment than Prudential Jennison. However, Technology Ultrasector is 1.58 times more volatile than Prudential Jennison Growth. It trades about 0.15 of its potential returns per unit of risk. Prudential Jennison Growth is currently generating about 0.2 per unit of risk. If you would invest  4,008  in Technology Ultrasector Profund on September 28, 2024 and sell it today you would earn a total of  230.00  from holding Technology Ultrasector Profund or generate 5.74% return on investment over 90 days.

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

Technology Ultrasector Profund  vs.  Prudential Jennison Growth

Technology Ultrasector

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Ultrasector Profund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Technology Ultrasector may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Prudential Jennison

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Growth are ranked lower than 12 (%) 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 Technology Ultrasector and Prudential Jennison

The main advantage of trading using opposite Technology Ultrasector and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Ultrasector 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 Technology Ultrasector Profund 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..