Correlation Between Prudential Jennison and Prudential Income

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

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

Diversification Opportunities for Prudential Jennison and Prudential Income

-0.07

Correlation Coefficient

Prudential Jennison  Prudential Income

Good diversification

The 3 months correlation between Prudential and Prudential is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Internatio and Prudential Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Income Builder 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 International are associated (or correlated) with Prudential Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Income Builder has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Prudential Income go up and down completely randomly.

Pair Corralation between Prudential Jennison and Prudential Income

Assuming the 90 days horizon Prudential Jennison International is expected to under-perform the Prudential Income. In addition to that, Prudential Jennison is 2.78 times more volatile than Prudential Income Builder. It trades about -0.02 of its total potential returns per unit of risk. Prudential Income Builder is currently generating about 0.08 per unit of volatility. If you would invest  1,017  in Prudential Income Builder on September 14, 2024 and sell it today you would earn a total of  16.00  from holding Prudential Income Builder or generate 1.57% return on investment over 90 days.

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

Prudential Jennison Internatio  vs.  Prudential Income Builder

Prudential Jennison

Risk-Adjusted Performance

0 of 100

Very Weak

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

Prudential Income Builder

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Income Builder are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Income 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 Income

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

The idea behind Prudential Jennison International and Prudential Income Builder 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 Global Correlations module to find global opportunities by holding instruments from different markets.