Correlation Between Bank of America and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Prudential Jennison Mlp, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Prudential Jennison.
Diversification Opportunities for Bank of America and Prudential Jennison
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Prudential is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Prudential Jennison Mlp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison Mlp and Bank of America 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 Bank of America 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 Mlp has no effect on the direction of Bank of America i.e., Bank of America and Prudential Jennison go up and down completely randomly.
Pair Corralation between Bank of America and Prudential Jennison
Considering the 90-day investment horizon Bank of America is expected to generate 2.04 times more return on investment than Prudential Jennison. However, Bank of America is 2.04 times more volatile than Prudential Jennison Mlp. It trades about 0.35 of its potential returns per unit of risk. Prudential Jennison Mlp is currently generating about 0.53 per unit of risk. If you would invest 4,133 in Bank of America on September 3, 2024 and sell it today you would earn a total of 618.00 from holding Bank of America or generate 14.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Prudential Jennison Mlp
Performance |
| Timeline |
| Bank of America |
| Prudential Jennison Mlp |
Bank of America and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Prudential Jennison
The main advantage of trading using opposite Bank of America and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
| Prudential Jennison vs. Prudential Jennison Global | Prudential Jennison vs. Mainstay Cushing Mlp | Prudential Jennison vs. Prudential Absolute Return | Prudential Jennison vs. Prudential Short Duration |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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