Correlation Between Microsoft and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Prudential Jennison Growth, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Prudential Jennison.
Diversification Opportunities for Microsoft and Prudential Jennison
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Microsoft and Prudential is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Prudential Jennison Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Prudential Jennison go up and down completely randomly.
Pair Corralation between Microsoft and Prudential Jennison
Given the investment horizon of 90 days Microsoft is expected to generate 0.98 times more return on investment than Prudential Jennison. However, Microsoft is 1.02 times less risky than Prudential Jennison. It trades about 0.09 of its potential returns per unit of risk. Prudential Jennison Growth is currently generating about 0.08 per unit of risk. If you would invest 31,884 in Microsoft on September 12, 2024 and sell it today you would earn a total of 12,992 from holding Microsoft or generate 40.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
Microsoft vs. Prudential Jennison Growth
Performance |
| Timeline |
| Microsoft |
| Prudential Jennison |
Microsoft and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Prudential Jennison
The main advantage of trading using opposite Microsoft and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Prudential Jennison vs. American Funds The | Prudential Jennison vs. American Funds The | Prudential Jennison vs. Growth Fund Of | Prudential Jennison vs. Growth Fund Of |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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