Correlation Between Prudential Jennison and Transamerica Financial
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Transamerica Financial 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 Transamerica Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Jennison Growth and Transamerica Financial Life, you can compare the effects of market volatilities on Prudential Jennison and Transamerica Financial 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 Transamerica Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Transamerica Financial.
Diversification Opportunities for Prudential Jennison and Transamerica Financial
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and Transamerica is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Growth and Transamerica Financial Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Financial 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 Growth are associated (or correlated) with Transamerica Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Financial has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Transamerica Financial go up and down completely randomly.
Pair Corralation between Prudential Jennison and Transamerica Financial
Assuming the 90 days horizon Prudential Jennison Growth is expected to generate 1.2 times more return on investment than Transamerica Financial. However, Prudential Jennison is 1.2 times more volatile than Transamerica Financial Life. It trades about 0.39 of its potential returns per unit of risk. Transamerica Financial Life is currently generating about 0.32 per unit of risk. If you would invest 6,274 in Prudential Jennison Growth on September 4, 2024 and sell it today you would earn a total of 486.00 from holding Prudential Jennison Growth or generate 7.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Jennison Growth vs. Transamerica Financial Life
Performance |
| Timeline |
| Prudential Jennison |
| Transamerica Financial |
Prudential Jennison and Transamerica Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and Transamerica Financial
The main advantage of trading using opposite Prudential Jennison and Transamerica Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Transamerica Financial 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 Transamerica Financial will offset losses from the drop in Transamerica Financial's long position.| Prudential Jennison vs. Transamerica Financial Life | Prudential Jennison vs. Angel Oak Financial | Prudential Jennison vs. Royce Global Financial | Prudential Jennison vs. Vanguard Financials Index |
| Transamerica Financial vs. Small Cap Stock | Transamerica Financial vs. Pgim Jennison Diversified | Transamerica Financial vs. Legg Mason Bw | Transamerica Financial vs. Fuller Thaler Behavioral |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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