Correlation Between Prudential Jennison and Putnam Floating
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Putnam Floating 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 Putnam Floating 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 Putnam Floating Rate, you can compare the effects of market volatilities on Prudential Jennison and Putnam Floating 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 Putnam Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Putnam Floating.
Diversification Opportunities for Prudential Jennison and Putnam Floating
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and Putnam is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Financial and Putnam Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Floating Rate 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 Putnam Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Floating Rate has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Putnam Floating go up and down completely randomly.
Pair Corralation between Prudential Jennison and Putnam Floating
Assuming the 90 days horizon Prudential Jennison Financial is expected to generate 12.25 times more return on investment than Putnam Floating. However, Prudential Jennison is 12.25 times more volatile than Putnam Floating Rate. It trades about 0.24 of its potential returns per unit of risk. Putnam Floating Rate is currently generating about 0.21 per unit of risk. If you would invest 2,497 in Prudential Jennison Financial on August 26, 2024 and sell it today you would earn a total of 217.00 from holding Prudential Jennison Financial or generate 8.69% 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. Putnam Floating Rate
Performance |
| Timeline |
| Prudential Jennison |
| Putnam Floating Rate |
Prudential Jennison and Putnam Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and Putnam Floating
The main advantage of trading using opposite Prudential Jennison and Putnam Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Putnam Floating 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 Putnam Floating will offset losses from the drop in Putnam Floating's long position.The idea behind Prudential Jennison Financial and Putnam Floating Rate 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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