Correlation Between Target Retirement and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Target Retirement 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 Target Retirement and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2050 and Prudential Jennison Financial, you can compare the effects of market volatilities on Target Retirement 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 Target Retirement with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Prudential Jennison.
Diversification Opportunities for Target Retirement and Prudential Jennison
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Target and Prudential is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2050 and Prudential Jennison Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Target Retirement 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 Target Retirement 2050 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 Target Retirement i.e., Target Retirement and Prudential Jennison go up and down completely randomly.
Pair Corralation between Target Retirement and Prudential Jennison
Assuming the 90 days horizon Target Retirement is expected to generate 5.19 times less return on investment than Prudential Jennison. But when comparing it to its historical volatility, Target Retirement 2050 is 2.65 times less risky than Prudential Jennison. It trades about 0.12 of its potential returns per unit of risk. Prudential Jennison Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,528 in Prudential Jennison Financial on August 29, 2024 and sell it today you would earn a total of 226.00 from holding Prudential Jennison Financial or generate 8.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Target Retirement 2050 vs. Prudential Jennison Financial
Performance |
| Timeline |
| Target Retirement 2050 |
| Prudential Jennison |
Target Retirement and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and Prudential Jennison
The main advantage of trading using opposite Target Retirement and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement 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.| Target Retirement vs. Touchstone Large Cap | Target Retirement vs. Qs Large Cap | Target Retirement vs. Transamerica Large Cap | Target Retirement vs. Dodge Cox Stock |
| Prudential Jennison vs. T Rowe Price | Prudential Jennison vs. Davis Financial Fund | Prudential Jennison vs. HUMANA INC | Prudential Jennison vs. Aquagold International |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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