Correlation Between Western Asset and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset High and Prudential Jennison Equity, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Prudential Jennison.
Diversification Opportunities for Western Asset and Prudential Jennison
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Prudential is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Prudential Jennison Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Western Asset 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 Western Asset High 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 Western Asset i.e., Western Asset and Prudential Jennison go up and down completely randomly.
Pair Corralation between Western Asset and Prudential Jennison
Assuming the 90 days horizon Western Asset High is expected to generate 0.27 times more return on investment than Prudential Jennison. However, Western Asset High is 3.65 times less risky than Prudential Jennison. It trades about 0.21 of its potential returns per unit of risk. Prudential Jennison Equity is currently generating about -0.01 per unit of risk. If you would invest 690.00 in Western Asset High on August 31, 2024 and sell it today you would earn a total of 5.00 from holding Western Asset High or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. Prudential Jennison Equity
Performance |
| Timeline |
| Western Asset High |
| Prudential Jennison |
Western Asset and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Prudential Jennison
The main advantage of trading using opposite Western Asset and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Vanguard High Yield Corporate | Western Asset vs. Vanguard High Yield Porate | Western Asset vs. Blackrock Hi Yld | Western Asset vs. Blackrock High Yield |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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