Correlation Between Jennison Natural and American Balanced
Can any of the company-specific risk be diversified away by investing in both Jennison Natural and American Balanced 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 Jennison Natural and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jennison Natural Resources and American Balanced Fund, you can compare the effects of market volatilities on Jennison Natural and American Balanced 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 Jennison Natural with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jennison Natural and American Balanced.
Diversification Opportunities for Jennison Natural and American Balanced
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jennison and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Jennison Natural Resources and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Jennison Natural 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 Jennison Natural Resources are associated (or correlated) with American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Jennison Natural i.e., Jennison Natural and American Balanced go up and down completely randomly.
Pair Corralation between Jennison Natural and American Balanced
Assuming the 90 days horizon Jennison Natural is expected to generate 1.44 times less return on investment than American Balanced. In addition to that, Jennison Natural is 2.35 times more volatile than American Balanced Fund. It trades about 0.04 of its total potential returns per unit of risk. American Balanced Fund is currently generating about 0.15 per unit of volatility. If you would invest 3,054 in American Balanced Fund on September 4, 2024 and sell it today you would earn a total of 645.00 from holding American Balanced Fund or generate 21.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Jennison Natural Resources vs. American Balanced Fund
Performance |
| Timeline |
| Jennison Natural Res |
| American Balanced |
Jennison Natural and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jennison Natural and American Balanced
The main advantage of trading using opposite Jennison Natural and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jennison Natural position performs unexpectedly, American Balanced 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 American Balanced will offset losses from the drop in American Balanced's long position.| Jennison Natural vs. Rbc Global Equity | Jennison Natural vs. The Hartford Equity | Jennison Natural vs. Small Cap Equity | Jennison Natural vs. The Fixed Income |
| American Balanced vs. American Funds 2015 | American Balanced vs. American Mutual Fund | American Balanced vs. American Funds Income | American Balanced vs. American Funds Preservation |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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