Correlation Between Elfun Diversified and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Elfun Diversified 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 Elfun Diversified and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elfun Diversified Fund and Prudential Jennison Global, you can compare the effects of market volatilities on Elfun Diversified 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 Elfun Diversified with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elfun Diversified and Prudential Jennison.
Diversification Opportunities for Elfun Diversified and Prudential Jennison
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elfun and Prudential is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Elfun Diversified Fund and Prudential Jennison Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Elfun Diversified 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 Elfun Diversified 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 Elfun Diversified i.e., Elfun Diversified and Prudential Jennison go up and down completely randomly.
Pair Corralation between Elfun Diversified and Prudential Jennison
Assuming the 90 days horizon Elfun Diversified Fund is expected to under-perform the Prudential Jennison. In addition to that, Elfun Diversified is 1.4 times more volatile than Prudential Jennison Global. It trades about -0.12 of its total potential returns per unit of risk. Prudential Jennison Global is currently generating about 0.3 per unit of volatility. If you would invest 1,596 in Prudential Jennison Global on October 21, 2024 and sell it today you would earn a total of 70.00 from holding Prudential Jennison Global or generate 4.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elfun Diversified Fund vs. Prudential Jennison Global
Performance |
| Timeline |
| Elfun Diversified |
| Prudential Jennison |
Elfun Diversified and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elfun Diversified and Prudential Jennison
The main advantage of trading using opposite Elfun Diversified and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elfun Diversified 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 Elfun Diversified Fund and Prudential Jennison Global 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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