Correlation Between Ford and Pgim Jennison
Can any of the company-specific risk be diversified away by investing in both Ford and Pgim 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 Ford and Pgim Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Pgim Jennison Rising, you can compare the effects of market volatilities on Ford and Pgim 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 Ford with a short position of Pgim Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Pgim Jennison.
Diversification Opportunities for Ford and Pgim Jennison
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Pgim is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pgim Jennison Rising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pgim Jennison Rising and Ford 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 Ford Motor are associated (or correlated) with Pgim Jennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pgim Jennison Rising has no effect on the direction of Ford i.e., Ford and Pgim Jennison go up and down completely randomly.
Pair Corralation between Ford and Pgim Jennison
Taking into account the 90-day investment horizon Ford is expected to generate 1.8 times less return on investment than Pgim Jennison. In addition to that, Ford is 3.14 times more volatile than Pgim Jennison Rising. It trades about 0.03 of its total potential returns per unit of risk. Pgim Jennison Rising is currently generating about 0.18 per unit of volatility. If you would invest 1,920 in Pgim Jennison Rising on September 2, 2024 and sell it today you would earn a total of 141.00 from holding Pgim Jennison Rising or generate 7.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Pgim Jennison Rising
Performance |
| Timeline |
| Ford Motor |
| Pgim Jennison Rising |
Ford and Pgim Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Pgim Jennison
The main advantage of trading using opposite Ford and Pgim Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Pgim 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 Pgim Jennison will offset losses from the drop in Pgim Jennison's long position.The idea behind Ford Motor and Pgim Jennison Rising 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.| Pgim Jennison vs. Prudential Jennison International | Pgim Jennison vs. Prudential Jennison International | Pgim Jennison vs. Pgim Jennison International | Pgim Jennison vs. Pgim Jennison International |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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