Correlation Between Western Asset and Prudential Jennison

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

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

Diversification Opportunities for Western Asset and Prudential Jennison

-0.81

Correlation Coefficient

Western Asset  Prudential Jennison

Pay attention - limited upside

The 3 months correlation between Western and Prudential is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset E and Prudential Jennison Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Western Asset 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 Western Asset E 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 Western Asset i.e., Western Asset and Prudential Jennison go up and down completely randomly.

Pair Corralation between Western Asset and Prudential Jennison

Assuming the 90 days horizon Western Asset E is expected to under-perform the Prudential Jennison. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset E is 3.57 times less risky than Prudential Jennison. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Prudential Jennison Financial is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,396  in Prudential Jennison Financial on September 2, 2024 and sell it today you would earn a total of  357.00  from holding Prudential Jennison Financial or generate 14.9% return on investment over 90 days.

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

Western Asset E  vs.  Prudential Jennison Financial

Western Asset E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset E has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Western Asset 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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Financial are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Jennison showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Asset and Prudential Jennison

The main advantage of trading using opposite Western Asset and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset E and Prudential Jennison Financial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.