Correlation Between Ford and Pgim Jennison

Can any of the company-specific risk be diversified away by investing in both Ford and Pgim 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 Ford and Pgim Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Pgim Jennison Technology, you can compare the effects of market volatilities on Ford and Pgim 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 Ford with a short position of Pgim Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Pgim Jennison.

Diversification Opportunities for Ford and Pgim Jennison

0.48

Correlation Coefficient

Ford  Pgim Jennison

Very weak diversification

The 3 months correlation between Ford and Pgim is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Pgim Jennison Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pgim Jennison Technology and Ford 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 Ford Motor are associated (or correlated) with Pgim Jennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pgim Jennison Technology has no effect on the direction of Ford i.e., Ford and Pgim Jennison go up and down completely randomly.

Pair Corralation between Ford and Pgim Jennison

Taking into account the 90-day investment horizon Ford is expected to generate 1.42 times less return on investment than Pgim Jennison. In addition to that, Ford is 1.65 times more volatile than Pgim Jennison Technology. It trades about 0.12 of its total potential returns per unit of risk. Pgim Jennison Technology is currently generating about 0.29 per unit of volatility. If you would invest  2,672  in Pgim Jennison Technology on September 5, 2024 and sell it today you would earn a total of  208.00  from holding Pgim Jennison Technology or generate 7.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Pgim Jennison Technology

Ford Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pgim Jennison Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pgim Jennison Technology are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pgim Jennison showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Pgim Jennison

The main advantage of trading using opposite Ford and Pgim Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Pgim 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 Pgim Jennison will offset losses from the drop in Pgim Jennison's long position.

The idea behind Ford Motor and Pgim Jennison Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.