Correlation Between Prudential Jennison and Prudential Balanced

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

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

Diversification Opportunities for Prudential Jennison and Prudential Balanced

0.8

Correlation Coefficient

Prudential Jennison  Prudential Balanced

Very poor diversification

The 3 months correlation between Prudential and Prudential is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Mid Cap and Prudential Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Balanced and Prudential Jennison 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 Jennison Mid Cap are associated (or correlated) with Prudential Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Balanced has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Prudential Balanced go up and down completely randomly.

Pair Corralation between Prudential Jennison and Prudential Balanced

Assuming the 90 days horizon Prudential Jennison Mid Cap is expected to generate 2.2 times more return on investment than Prudential Balanced. However, Prudential Jennison is 2.2 times more volatile than Prudential Balanced Fund. It trades about 0.21 of its potential returns per unit of risk. Prudential Balanced Fund is currently generating about 0.13 per unit of risk. If you would invest  2,091  in Prudential Jennison Mid Cap on September 13, 2024 and sell it today you would earn a total of  259.00  from holding Prudential Jennison Mid Cap or generate 12.39% return on investment over 90 days.

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

Prudential Jennison Mid Cap  vs.  Prudential Balanced Fund

Prudential Jennison Mid

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Mid Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Jennison may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Prudential Balanced

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Balanced Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Prudential Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Jennison and Prudential Balanced

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

The idea behind Prudential Jennison Mid Cap and Prudential Balanced Fund 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.