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 Diversified 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
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Prudential is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified 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 Diversified 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 is expected to generate 2.96 times less return on investment than Prudential Jennison. But when comparing it to its historical volatility, Western Asset Diversified is 1.82 times less risky than Prudential Jennison. It trades about 0.08 of its potential returns per unit of risk. Prudential Jennison Equity is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,414 in Prudential Jennison Equity on September 1, 2024 and sell it today you would earn a total of 20.00 from holding Prudential Jennison Equity or generate 1.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Asset Diversified vs. Prudential Jennison Equity
Performance |
| Timeline |
| Western Asset Diversified |
| 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 Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
| Prudential Jennison vs. Amg River Road | Prudential Jennison vs. Ultramid Cap Profund Ultramid Cap | Prudential Jennison vs. Mutual Of America | Prudential Jennison vs. Victory Rs Partners |
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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