Correlation Between Prudential Floating and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Prudential Floating 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 Prudential Floating and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Floating Rate and Prudential Jennison Equity, you can compare the effects of market volatilities on Prudential Floating 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 Prudential Floating with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Floating and Prudential Jennison.
Diversification Opportunities for Prudential Floating and Prudential Jennison
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and Prudential is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Floating Rate and Prudential Jennison Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Prudential Floating 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 Floating Rate 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 Prudential Floating i.e., Prudential Floating and Prudential Jennison go up and down completely randomly.
Pair Corralation between Prudential Floating and Prudential Jennison
Assuming the 90 days horizon Prudential Floating is expected to generate 1.18 times less return on investment than Prudential Jennison. But when comparing it to its historical volatility, Prudential Floating Rate is 4.48 times less risky than Prudential Jennison. It trades about 0.21 of its potential returns per unit of risk. Prudential Jennison Equity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,416 in Prudential Jennison Equity on August 24, 2024 and sell it today you would earn a total of 363.00 from holding Prudential Jennison Equity or generate 25.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Floating Rate vs. Prudential Jennison Equity
Performance |
| Timeline |
| Prudential Floating Rate |
| Prudential Jennison |
Prudential Floating and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Floating and Prudential Jennison
The main advantage of trading using opposite Prudential Floating and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Floating 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.The idea behind Prudential Floating Rate and Prudential Jennison 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.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |