Correlation Between Jennison Natural and American Independence

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

By analyzing existing cross correlation between Jennison Natural Resources and American Independence Kansas, you can compare the effects of market volatilities on Jennison Natural and American Independence 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 Jennison Natural with a short position of American Independence. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jennison Natural and American Independence.

Diversification Opportunities for Jennison Natural and American Independence

0.02

Correlation Coefficient

Jennison Natural  American Independence

Significant diversification

The 3 months correlation between Jennison and American is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Jennison Natural Resources and American Independence Kansas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Independence and Jennison Natural 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 Jennison Natural Resources are associated (or correlated) with American Independence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Independence has no effect on the direction of Jennison Natural i.e., Jennison Natural and American Independence go up and down completely randomly.

Pair Corralation between Jennison Natural and American Independence

Assuming the 90 days horizon Jennison Natural Resources is expected to generate 5.95 times more return on investment than American Independence. However, Jennison Natural is 5.95 times more volatile than American Independence Kansas. It trades about 0.09 of its potential returns per unit of risk. American Independence Kansas is currently generating about 0.05 per unit of risk. If you would invest  4,028  in Jennison Natural Resources on September 3, 2024 and sell it today you would earn a total of  244.00  from holding Jennison Natural Resources or generate 6.06% return on investment over 90 days.

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

Jennison Natural Resources  vs.  American Independence Kansas

Jennison Natural Res

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jennison Natural Resources are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Jennison Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Independence

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Independence Kansas are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Independence is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jennison Natural and American Independence

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

The idea behind Jennison Natural Resources and American Independence Kansas 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.