Correlation Between Touchstone Premium and Prudential Jennison

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

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

Diversification Opportunities for Touchstone Premium and Prudential Jennison

0.82

Correlation Coefficient

Touchstone Premium  Prudential Jennison

Very poor diversification

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

Pair Corralation between Touchstone Premium and Prudential Jennison

Assuming the 90 days horizon Touchstone Premium Yield is expected to generate 1.8 times more return on investment than Prudential Jennison. However, Touchstone Premium is 1.8 times more volatile than Prudential Jennison Equity. It trades about 0.07 of its potential returns per unit of risk. Prudential Jennison Equity is currently generating about 0.11 per unit of risk. If you would invest  810.00  in Touchstone Premium Yield on December 25, 2024 and sell it today you would earn a total of  36.00  from holding Touchstone Premium Yield or generate 4.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Touchstone Premium Yield  vs.  Prudential Jennison Equity

Touchstone Premium Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Premium Yield are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Touchstone Premium is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Jennison

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Prudential Jennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Touchstone Premium and Prudential Jennison

The main advantage of trading using opposite Touchstone Premium and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Premium 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 Touchstone Premium Yield and Prudential Jennison Equity 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.