Correlation Between Financial Industries and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Financial Industries 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 Financial Industries and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Industries Fund and Prudential Jennison Financial, you can compare the effects of market volatilities on Financial Industries 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 Financial Industries with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Prudential Jennison.
Diversification Opportunities for Financial Industries and Prudential Jennison
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and Prudential is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Prudential Jennison Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Financial Industries 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 Financial Industries 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 Financial Industries i.e., Financial Industries and Prudential Jennison go up and down completely randomly.
Pair Corralation between Financial Industries and Prudential Jennison
Assuming the 90 days horizon Financial Industries Fund is expected to generate 1.04 times more return on investment than Prudential Jennison. However, Financial Industries is 1.04 times more volatile than Prudential Jennison Financial. It trades about -0.15 of its potential returns per unit of risk. Prudential Jennison Financial is currently generating about -0.16 per unit of risk. If you would invest 1,906 in Financial Industries Fund on November 27, 2024 and sell it today you would lose (49.00) from holding Financial Industries Fund or give up 2.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Industries Fund vs. Prudential Jennison Financial
Performance |
| Timeline |
| Financial Industries |
| Prudential Jennison |
Financial Industries and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Industries and Prudential Jennison
The main advantage of trading using opposite Financial Industries and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries 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.| Financial Industries vs. Ashmore Emerging Markets | Financial Industries vs. Nuveen Small Cap | Financial Industries vs. Astoncrosswind Small Cap | Financial Industries vs. Glg Intl Small |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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