Correlation Between American Funds and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Conservative and Prudential Jennison International, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Prudential Jennison.
Diversification Opportunities for American Funds and Prudential Jennison
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Prudential is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative and Prudential Jennison Internatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and American Funds 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 American Funds Conservative 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 American Funds i.e., American Funds and Prudential Jennison go up and down completely randomly.
Pair Corralation between American Funds and Prudential Jennison
Assuming the 90 days horizon American Funds Conservative is expected to generate 0.31 times more return on investment than Prudential Jennison. However, American Funds Conservative is 3.24 times less risky than Prudential Jennison. It trades about 0.09 of its potential returns per unit of risk. Prudential Jennison International is currently generating about -0.08 per unit of risk. If you would invest 1,346 in American Funds Conservative on August 29, 2024 and sell it today you would earn a total of 24.00 from holding American Funds Conservative or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Conservative vs. Prudential Jennison Internatio
Performance |
| Timeline |
| American Funds Conse |
| Prudential Jennison |
American Funds and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Prudential Jennison
The main advantage of trading using opposite American Funds and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Artisan Select Equity | American Funds vs. Dreyfusstandish Global Fixed | American Funds vs. Gmo Global Equity | American Funds vs. Dodge International Stock |
| Prudential Jennison vs. Artisan High Income | Prudential Jennison vs. Gmo High Yield | Prudential Jennison vs. Prudential High Yield | Prudential Jennison vs. Blackrock High Yield |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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