Correlation Between Prudential Jennison and Shenkman Short
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Shenkman Short 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 Shenkman Short 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 Shenkman Short Duration, you can compare the effects of market volatilities on Prudential Jennison and Shenkman Short 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 Shenkman Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Shenkman Short.
Diversification Opportunities for Prudential Jennison and Shenkman Short
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and Shenkman is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Financial and Shenkman Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenkman Short Duration 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 Shenkman Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenkman Short Duration has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Shenkman Short go up and down completely randomly.
Pair Corralation between Prudential Jennison and Shenkman Short
Assuming the 90 days horizon Prudential Jennison Financial is expected to generate 13.06 times more return on investment than Shenkman Short. However, Prudential Jennison is 13.06 times more volatile than Shenkman Short Duration. It trades about 0.26 of its potential returns per unit of risk. Shenkman Short Duration is currently generating about 0.08 per unit of risk. If you would invest 2,474 in Prudential Jennison Financial on September 5, 2024 and sell it today you would earn a total of 234.00 from holding Prudential Jennison Financial or generate 9.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Prudential Jennison Financial vs. Shenkman Short Duration
Performance |
| Timeline |
| Prudential Jennison |
| Shenkman Short Duration |
Prudential Jennison and Shenkman Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and Shenkman Short
The main advantage of trading using opposite Prudential Jennison and Shenkman Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Shenkman Short 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 Shenkman Short will offset losses from the drop in Shenkman Short's long position.The idea behind Prudential Jennison Financial and Shenkman Short Duration 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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