Correlation Between Prudential Jennison and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Franklin Lifesmart 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 Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Jennison Financial and Franklin Lifesmart 2050, you can compare the effects of market volatilities on Prudential Jennison and Franklin Lifesmart 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 Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Franklin Lifesmart.
Diversification Opportunities for Prudential Jennison and Franklin Lifesmart
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Franklin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Financial and Franklin Lifesmart 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2050 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 Financial are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2050 has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between Prudential Jennison and Franklin Lifesmart
Assuming the 90 days horizon Prudential Jennison Financial is expected to under-perform the Franklin Lifesmart. In addition to that, Prudential Jennison is 1.71 times more volatile than Franklin Lifesmart 2050. It trades about 0.0 of its total potential returns per unit of risk. Franklin Lifesmart 2050 is currently generating about 0.17 per unit of volatility. If you would invest 1,596 in Franklin Lifesmart 2050 on September 13, 2024 and sell it today you would earn a total of 24.00 from holding Franklin Lifesmart 2050 or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Jennison Financial vs. Franklin Lifesmart 2050
Performance |
| Timeline |
| Prudential Jennison |
| Franklin Lifesmart 2050 |
Prudential Jennison and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and Franklin Lifesmart
The main advantage of trading using opposite Prudential Jennison and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Franklin Lifesmart 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 Franklin Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.| Prudential Jennison vs. Gabelli Convertible And | Prudential Jennison vs. Absolute Convertible Arbitrage | Prudential Jennison vs. Advent Claymore Convertible | Prudential Jennison vs. Virtus Convertible |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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