Correlation Between Clearbridge Energy and Prudential Jennison

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

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

Diversification Opportunities for Clearbridge Energy and Prudential Jennison

-0.62

Correlation Coefficient

Clearbridge Energy  Prudential Jennison

Excellent diversification

The 3 months correlation between Clearbridge and Prudential is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Energy Mlp and Prudential Jennison Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Clearbridge Energy 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 Clearbridge Energy Mlp 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 Clearbridge Energy i.e., Clearbridge Energy and Prudential Jennison go up and down completely randomly.

Pair Corralation between Clearbridge Energy and Prudential Jennison

Assuming the 90 days horizon Clearbridge Energy Mlp is expected to generate 2.17 times more return on investment than Prudential Jennison. However, Clearbridge Energy is 2.17 times more volatile than Prudential Jennison Equity. It trades about 0.13 of its potential returns per unit of risk. Prudential Jennison Equity is currently generating about -0.12 per unit of risk. If you would invest  4,814  in Clearbridge Energy Mlp on September 14, 2024 and sell it today you would earn a total of  441.00  from holding Clearbridge Energy Mlp or generate 9.16% return on investment over 90 days.

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

Clearbridge Energy Mlp  vs.  Prudential Jennison Equity

Clearbridge Energy Mlp

Risk-Adjusted Performance

10 of 100

OK

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

Prudential Jennison

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Jennison Equity has generated negative risk-adjusted returns adding no value to fund investors. 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 Clearbridge Energy and Prudential Jennison

The main advantage of trading using opposite Clearbridge Energy and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearbridge Energy 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 Clearbridge Energy Mlp 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.