Correlation Between Global Gold and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Global Gold 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 Global Gold and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Gold Fund and Prudential Jennison Growth, you can compare the effects of market volatilities on Global Gold 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 Global Gold with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Prudential Jennison.
Diversification Opportunities for Global Gold and Prudential Jennison
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Global and Prudential is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Prudential Jennison Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Global Gold 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 Global Gold Fund 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 Global Gold i.e., Global Gold and Prudential Jennison go up and down completely randomly.
Pair Corralation between Global Gold and Prudential Jennison
Assuming the 90 days horizon Global Gold is expected to generate 1.65 times less return on investment than Prudential Jennison. In addition to that, Global Gold is 1.49 times more volatile than Prudential Jennison Growth. It trades about 0.04 of its total potential returns per unit of risk. Prudential Jennison Growth is currently generating about 0.1 per unit of volatility. If you would invest 3,846 in Prudential Jennison Growth on September 3, 2024 and sell it today you would earn a total of 2,805 from holding Prudential Jennison Growth or generate 72.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Gold Fund vs. Prudential Jennison Growth
Performance |
| Timeline |
| Global Gold Fund |
| Prudential Jennison |
Global Gold and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Gold and Prudential Jennison
The main advantage of trading using opposite Global Gold and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold 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.| Global Gold vs. Baird Smallmid Cap | Global Gold vs. The Hartford Small | Global Gold vs. Touchstone Small Cap | Global Gold vs. Small Cap Value |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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