Correlation Between Smallcap Growth and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth 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 Smallcap Growth and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Growth Fund and Prudential Jennison Equity, you can compare the effects of market volatilities on Smallcap Growth 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 Smallcap Growth with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Prudential Jennison.
Diversification Opportunities for Smallcap Growth and Prudential Jennison
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smallcap and Prudential is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Prudential Jennison Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Smallcap Growth 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 Smallcap Growth Fund 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 Smallcap Growth i.e., Smallcap Growth and Prudential Jennison go up and down completely randomly.
Pair Corralation between Smallcap Growth and Prudential Jennison
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 1.19 times more return on investment than Prudential Jennison. However, Smallcap Growth is 1.19 times more volatile than Prudential Jennison Equity. It trades about 0.09 of its potential returns per unit of risk. Prudential Jennison Equity is currently generating about 0.06 per unit of risk. If you would invest 1,271 in Smallcap Growth Fund on September 15, 2024 and sell it today you would earn a total of 406.00 from holding Smallcap Growth Fund or generate 31.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap Growth Fund vs. Prudential Jennison Equity
Performance |
| Timeline |
| Smallcap Growth |
| Prudential Jennison |
Smallcap Growth and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Prudential Jennison
The main advantage of trading using opposite Smallcap Growth and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth 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.| Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management |
| Prudential Jennison vs. Smallcap Growth Fund | Prudential Jennison vs. Mid Cap Growth | Prudential Jennison vs. Vy Baron Growth | Prudential Jennison vs. Qs Moderate Growth |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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