Correlation Between Prudential Jennison and Fidelity Advisor
Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Fidelity Advisor 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 Fidelity Advisor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Jennison Focused and Fidelity Advisor New, you can compare the effects of market volatilities on Prudential Jennison and Fidelity Advisor 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 Fidelity Advisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Fidelity Advisor.
Diversification Opportunities for Prudential Jennison and Fidelity Advisor
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prudential and Fidelity is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Focused and Fidelity Advisor New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Advisor New 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 Focused are associated (or correlated) with Fidelity Advisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Advisor New has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Fidelity Advisor go up and down completely randomly.
Pair Corralation between Prudential Jennison and Fidelity Advisor
Assuming the 90 days horizon Prudential Jennison Focused is expected to under-perform the Fidelity Advisor. In addition to that, Prudential Jennison is 1.5 times more volatile than Fidelity Advisor New. It trades about -0.24 of its total potential returns per unit of risk. Fidelity Advisor New is currently generating about -0.2 per unit of volatility. If you would invest 3,508 in Fidelity Advisor New on January 20, 2024 and sell it today you would lose (107.00) from holding Fidelity Advisor New or give up 3.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Jennison Focused vs. Fidelity Advisor New
Performance |
| Timeline |
| Prudential Jennison |
| Fidelity Advisor New |
Prudential Jennison and Fidelity Advisor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Jennison and Fidelity Advisor
The main advantage of trading using opposite Prudential Jennison and Fidelity Advisor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Jennison position performs unexpectedly, Fidelity Advisor 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 Fidelity Advisor will offset losses from the drop in Fidelity Advisor's long position.The idea behind Prudential Jennison Focused and Fidelity Advisor New 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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Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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