Correlation Between Prudential Jennison and New Perspective
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Prudential Jennison and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and New Perspective.
Diversification Opportunities for Prudential Jennison and New Perspective
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and New is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Financial and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and New Perspective go up and down completely randomly.
Pair Corralation between Prudential Jennison and New Perspective
Assuming the 90 days horizon Prudential Jennison Financial is expected to generate 1.24 times more return on investment than New Perspective. However, Prudential Jennison is 1.24 times more volatile than New Perspective Fund. It trades about 0.09 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.06 per unit of risk. If you would invest 1,631 in Prudential Jennison Financial on November 27, 2024 and sell it today you would earn a total of 856.00 from holding Prudential Jennison Financial or generate 52.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Jennison Financial vs. New Perspective Fund
Performance |
| Timeline |
| Prudential Jennison |
| New Perspective |
Prudential Jennison and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and New Perspective
The main advantage of trading using opposite Prudential Jennison and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective's long position.| Prudential Jennison vs. Ab High Income | Prudential Jennison vs. Pace High Yield | Prudential Jennison vs. Access Flex High | Prudential Jennison vs. Transamerica High Yield |
| New Perspective vs. Western Asset Premier | New Perspective vs. John Hancock Government | New Perspective vs. Vanguard Intermediate Term Government | New Perspective vs. Us Government Securities |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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