Correlation Between Jennison Natural and Sp 500
Can any of the company-specific risk be diversified away by investing in both Jennison Natural and Sp 500 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 Sp 500 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 Sp 500 Equal, you can compare the effects of market volatilities on Jennison Natural and Sp 500 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 Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jennison Natural and Sp 500.
Diversification Opportunities for Jennison Natural and Sp 500
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Jennison and INDEX is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Jennison Natural Resources and Sp 500 Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Equal 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 Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Equal has no effect on the direction of Jennison Natural i.e., Jennison Natural and Sp 500 go up and down completely randomly.
Pair Corralation between Jennison Natural and Sp 500
Assuming the 90 days horizon Jennison Natural is expected to generate 1.75 times less return on investment than Sp 500. In addition to that, Jennison Natural is 1.25 times more volatile than Sp 500 Equal. It trades about 0.07 of its total potential returns per unit of risk. Sp 500 Equal is currently generating about 0.15 per unit of volatility. If you would invest 5,568 in Sp 500 Equal on August 30, 2024 and sell it today you would earn a total of 163.00 from holding Sp 500 Equal or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jennison Natural Resources vs. Sp 500 Equal
Performance |
| Timeline |
| Jennison Natural Res |
| Sp 500 Equal |
Jennison Natural and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jennison Natural and Sp 500
The main advantage of trading using opposite Jennison Natural and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jennison Natural position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.| Jennison Natural vs. Aig Government Money | Jennison Natural vs. Inverse Government Long | Jennison Natural vs. Government Securities Fund | Jennison Natural vs. Us Government Securities |
| Sp 500 vs. Franklin Moderate Allocation | Sp 500 vs. American Funds Retirement | Sp 500 vs. Franklin Lifesmart Retirement | Sp 500 vs. Target Retirement 2040 |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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