Correlation Between Prudential Jennison and Western Asset

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

Diversification Opportunities for Prudential Jennison and Western Asset

0.2

Correlation Coefficient

Prudential Jennison  Western Asset

Modest diversification

The 3 months correlation between Prudential and Western is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Financial and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Managed has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Western Asset go up and down completely randomly.

Pair Corralation between Prudential Jennison and Western Asset

Assuming the 90 days horizon Prudential Jennison Financial is expected to generate 5.27 times more return on investment than Western Asset. However, Prudential Jennison is 5.27 times more volatile than Western Asset Managed. It trades about 0.08 of its potential returns per unit of risk. Western Asset Managed is currently generating about 0.03 per unit of risk. If you would invest  2,162  in Prudential Jennison Financial on September 29, 2024 and sell it today you would earn a total of  278.00  from holding Prudential Jennison Financial or generate 12.86% return on investment over 90 days.

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

Prudential Jennison Financial  vs.  Western Asset Managed

Prudential Jennison

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Jennison Financial has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Jennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Western Asset 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 Western Asset

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

The idea behind Prudential Jennison Financial and Western Asset Managed 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.