Correlation Between Maryland Tax-free and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Maryland Tax-free 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 Maryland Tax-free and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Maryland Tax Free Bond and Prudential Jennison Servative, you can compare the effects of market volatilities on Maryland Tax-free 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 Maryland Tax-free with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maryland Tax-free and Prudential Jennison.
Diversification Opportunities for Maryland Tax-free and Prudential Jennison
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Maryland and Prudential is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Maryland Tax Free Bond and Prudential Jennison Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Maryland Tax-free 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 Maryland Tax Free Bond 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 Maryland Tax-free i.e., Maryland Tax-free and Prudential Jennison go up and down completely randomly.
Pair Corralation between Maryland Tax-free and Prudential Jennison
Assuming the 90 days horizon Maryland Tax Free Bond is expected to under-perform the Prudential Jennison. But the mutual fund apears to be less risky and, when comparing its historical volatility, Maryland Tax Free Bond is 5.94 times less risky than Prudential Jennison. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Prudential Jennison Servative is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,885 in Prudential Jennison Servative on November 3, 2024 and sell it today you would earn a total of 58.00 from holding Prudential Jennison Servative or generate 3.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Maryland Tax Free Bond vs. Prudential Jennison Servative
Performance |
| Timeline |
| Maryland Tax Free |
| Prudential Jennison |
Maryland Tax-free and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Maryland Tax-free and Prudential Jennison
The main advantage of trading using opposite Maryland Tax-free and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maryland Tax-free 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.| Maryland Tax-free vs. Dreyfusstandish Global Fixed | Maryland Tax-free vs. Rbc Bluebay Emerging | Maryland Tax-free vs. Intermediate Term Bond Fund | Maryland Tax-free vs. Ft 7934 Corporate |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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