Correlation Between Banking Fund and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Banking Fund 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 Banking Fund and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banking Fund Investor and Prudential Jennison Financial, you can compare the effects of market volatilities on Banking Fund 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 Banking Fund with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Prudential Jennison.
Diversification Opportunities for Banking Fund and Prudential Jennison
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Banking and Prudential is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Investor and Prudential Jennison Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Banking Fund 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 Banking Fund Investor 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 Banking Fund i.e., Banking Fund and Prudential Jennison go up and down completely randomly.
Pair Corralation between Banking Fund and Prudential Jennison
Assuming the 90 days horizon Banking Fund Investor is expected to generate 1.47 times more return on investment than Prudential Jennison. However, Banking Fund is 1.47 times more volatile than Prudential Jennison Financial. It trades about 0.22 of its potential returns per unit of risk. Prudential Jennison Financial is currently generating about 0.21 per unit of risk. If you would invest 9,717 in Banking Fund Investor on August 28, 2024 and sell it today you would earn a total of 1,820 from holding Banking Fund Investor or generate 18.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Investor vs. Prudential Jennison Financial
Performance |
| Timeline |
| Banking Fund Investor |
| Prudential Jennison |
Banking Fund and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Prudential Jennison
The main advantage of trading using opposite Banking Fund and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund 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.| Banking Fund vs. Financial Services Fund | Banking Fund vs. Health Care Fund | Banking Fund vs. Retailing Fund Investor | Banking Fund vs. Technology Fund Investor |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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