Correlation Between Prudential Absolute and Prudential Jennison

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

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

Diversification Opportunities for Prudential Absolute and Prudential Jennison

0.6

Correlation Coefficient

Prudential Absolute  Prudential Jennison

Poor diversification

The 3 months correlation between Prudential and PRUDENTIAL is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Absolute Return and Prudential Jennison Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Prudential Absolute 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 Prudential Absolute Return 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 Prudential Absolute i.e., Prudential Absolute and Prudential Jennison go up and down completely randomly.

Pair Corralation between Prudential Absolute and Prudential Jennison

Assuming the 90 days horizon Prudential Absolute is expected to generate 3.3 times less return on investment than Prudential Jennison. But when comparing it to its historical volatility, Prudential Absolute Return is 9.51 times less risky than Prudential Jennison. It trades about 0.24 of its potential returns per unit of risk. Prudential Jennison Global is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,667  in Prudential Jennison Global on September 3, 2024 and sell it today you would earn a total of  230.00  from holding Prudential Jennison Global or generate 4.93% return on investment over 90 days.

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

Prudential Absolute Return  vs.  Prudential Jennison Global

Prudential Absolute

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Absolute Return are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Absolute is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Jennison

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Global are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Jennison is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Absolute and Prudential Jennison

The main advantage of trading using opposite Prudential Absolute and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Absolute 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.

The idea behind Prudential Absolute Return and Prudential Jennison Global 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.