Correlation Between Prudential Jennison and Franklin
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Franklin 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 Franklin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Jennison Equity and Franklin Government Money, you can compare the effects of market volatilities on Prudential Jennison and Franklin 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 Franklin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Franklin.
Diversification Opportunities for Prudential Jennison and Franklin
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Prudential and Franklin is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Equity and Franklin Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Government Money 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 Equity are associated (or correlated) with Franklin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Government Money has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Franklin go up and down completely randomly.
Pair Corralation between Prudential Jennison and Franklin
Assuming the 90 days horizon Prudential Jennison Equity is expected to generate 5.23 times more return on investment than Franklin. However, Prudential Jennison is 5.23 times more volatile than Franklin Government Money. It trades about 0.07 of its potential returns per unit of risk. Franklin Government Money is currently generating about 0.12 per unit of risk. If you would invest 1,161 in Prudential Jennison Equity on August 28, 2024 and sell it today you would earn a total of 269.00 from holding Prudential Jennison Equity or generate 23.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Prudential Jennison Equity vs. Franklin Government Money
Performance |
| Timeline |
| Prudential Jennison |
| Franklin Government Money |
Prudential Jennison and Franklin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and Franklin
The main advantage of trading using opposite Prudential Jennison and Franklin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Franklin 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 Franklin will offset losses from the drop in Franklin's long position.The idea behind Prudential Jennison Equity and Franklin Government Money 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.
| Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard 500 Index | Franklin vs. Vanguard Total Stock | Franklin vs. Vanguard Total Stock |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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