Correlation Between Prudential Jennison and Aqr Long
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Aqr Long 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 Aqr Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Jennison Mid Cap and Aqr Long Short Equity, you can compare the effects of market volatilities on Prudential Jennison and Aqr Long 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 Aqr Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Aqr Long.
Diversification Opportunities for Prudential Jennison and Aqr Long
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prudential and Aqr is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Mid Cap and Aqr Long Short Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Long Short 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 Mid Cap are associated (or correlated) with Aqr Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Long Short has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Aqr Long go up and down completely randomly.
Pair Corralation between Prudential Jennison and Aqr Long
Assuming the 90 days horizon Prudential Jennison Mid Cap is expected to generate 2.08 times more return on investment than Aqr Long. However, Prudential Jennison is 2.08 times more volatile than Aqr Long Short Equity. It trades about 0.11 of its potential returns per unit of risk. Aqr Long Short Equity is currently generating about 0.14 per unit of risk. If you would invest 2,068 in Prudential Jennison Mid Cap on September 12, 2024 and sell it today you would earn a total of 306.00 from holding Prudential Jennison Mid Cap or generate 14.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Jennison Mid Cap vs. Aqr Long Short Equity
Performance |
| Timeline |
| Prudential Jennison Mid |
| Aqr Long Short |
Prudential Jennison and Aqr Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and Aqr Long
The main advantage of trading using opposite Prudential Jennison and Aqr Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Aqr Long 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 Aqr Long will offset losses from the drop in Aqr Long's long position.The idea behind Prudential Jennison Mid Cap and Aqr Long Short Equity 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.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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