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 Growth 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 Growth 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 Growth 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 Growth is expected to generate 2.3 times more return on investment than Prudential Balanced. However, Prudential Jennison is 2.3 times more volatile than Prudential Balanced Fund. It trades about 0.2 of its potential returns per unit of risk. Prudential Balanced Fund is currently generating about 0.15 per unit of risk. If you would invest  6,837  in Prudential Jennison Growth on September 5, 2024 and sell it today you would earn a total of  925.00  from holding Prudential Jennison Growth or generate 13.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Prudential Jennison Growth  vs.  Prudential Balanced Fund

Prudential Jennison

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Growth are ranked lower than 15 (%) 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.

Prudential Balanced

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Balanced Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Growth 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.