Correlation Between Prudential Jennison and Aggressive Allocation

Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Aggressive Allocation 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 Aggressive Allocation 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 Aggressive Allocation Fund, you can compare the effects of market volatilities on Prudential Jennison and Aggressive Allocation 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 Aggressive Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Aggressive Allocation.

Diversification Opportunities for Prudential Jennison and Aggressive Allocation

0.73

Correlation Coefficient

Prudential Jennison  Aggressive Allocation

Poor diversification

The 3 months correlation between Prudential and Aggressive is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Financial and Aggressive Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Allocation 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 Aggressive Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Allocation has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Aggressive Allocation go up and down completely randomly.

Pair Corralation between Prudential Jennison and Aggressive Allocation

Assuming the 90 days horizon Prudential Jennison Financial is expected to generate 1.77 times more return on investment than Aggressive Allocation. However, Prudential Jennison is 1.77 times more volatile than Aggressive Allocation Fund. It trades about 0.19 of its potential returns per unit of risk. Aggressive Allocation Fund is currently generating about 0.13 per unit of risk. If you would invest  2,396  in Prudential Jennison Financial on September 2, 2024 and sell it today you would earn a total of  357.00  from holding Prudential Jennison Financial or generate 14.9% return on investment over 90 days.

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

Prudential Jennison Financial  vs.  Aggressive Allocation Fund

Prudential Jennison

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Financial are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Jennison showed solid returns over the last few months and may actually be approaching a breakup point.

Aggressive Allocation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Allocation Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aggressive Allocation 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 Aggressive Allocation

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

The idea behind Prudential Jennison Financial and Aggressive Allocation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.