Correlation Between Prudential Jennison and Prudential Core
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Prudential Core 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 Prudential Jennison and Prudential Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Jennison Value and Prudential E Bond, you can compare the effects of market volatilities on Prudential Jennison and Prudential Core 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 Prudential Jennison with a short position of Prudential Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Prudential Core.
Diversification Opportunities for Prudential Jennison and Prudential Core
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Prudential and Prudential is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Value and Prudential E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential E Bond and Prudential Jennison 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 Prudential Jennison Value are associated (or correlated) with Prudential Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential E Bond has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Prudential Core go up and down completely randomly.
Pair Corralation between Prudential Jennison and Prudential Core
Assuming the 90 days horizon Prudential Jennison Value is expected to generate 2.14 times more return on investment than Prudential Core. However, Prudential Jennison is 2.14 times more volatile than Prudential E Bond. It trades about 0.4 of its potential returns per unit of risk. Prudential E Bond is currently generating about 0.18 per unit of risk. If you would invest 2,362 in Prudential Jennison Value on September 2, 2024 and sell it today you would earn a total of 148.00 from holding Prudential Jennison Value or generate 6.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Jennison Value vs. Prudential E Bond
Performance |
| Timeline |
| Prudential Jennison Value |
| Prudential E Bond |
Prudential Jennison and Prudential Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and Prudential Core
The main advantage of trading using opposite Prudential Jennison and Prudential Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Prudential Core 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 Core will offset losses from the drop in Prudential Core's long position.The idea behind Prudential Jennison Value and Prudential E Bond 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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