Correlation Between Prudential Jennison and Franklin Lifesmart

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

By analyzing existing cross correlation between Prudential Jennison Financial and Franklin Lifesmart 2040, you can compare the effects of market volatilities on Prudential Jennison and Franklin Lifesmart 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 Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Franklin Lifesmart.

Diversification Opportunities for Prudential Jennison and Franklin Lifesmart

0.59

Correlation Coefficient

Prudential Jennison  Franklin Lifesmart

Very weak diversification

The 3 months correlation between Prudential and Franklin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Financial and Franklin Lifesmart 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2040 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 Financial are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2040 has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Franklin Lifesmart go up and down completely randomly.

Pair Corralation between Prudential Jennison and Franklin Lifesmart

Assuming the 90 days horizon Prudential Jennison Financial is expected to generate 2.5 times more return on investment than Franklin Lifesmart. However, Prudential Jennison is 2.5 times more volatile than Franklin Lifesmart 2040. It trades about 0.1 of its potential returns per unit of risk. Franklin Lifesmart 2040 is currently generating about 0.04 per unit of risk. If you would invest  2,450  in Prudential Jennison Financial on September 19, 2024 and sell it today you would earn a total of  176.00  from holding Prudential Jennison Financial or generate 7.18% return on investment over 90 days.

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

Prudential Jennison Financial  vs.  Franklin Lifesmart 2040

Prudential Jennison

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Financial are ranked lower than 7 (%) 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.

Franklin Lifesmart 2040

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Lifesmart 2040 are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Franklin Lifesmart 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 Franklin Lifesmart

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

The idea behind Prudential Jennison Financial and Franklin Lifesmart 2040 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.