Correlation Between State Street and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both State Street and Prudential Jennison 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 State Street and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Corp and Prudential Jennison International, you can compare the effects of market volatilities on State Street and Prudential Jennison 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 State Street with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Prudential Jennison.
Diversification Opportunities for State Street and Prudential Jennison
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between State and Prudential is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp and Prudential Jennison Internatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and State Street 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 State Street Corp are associated (or correlated) with Prudential Jennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Jennison has no effect on the direction of State Street i.e., State Street and Prudential Jennison go up and down completely randomly.
Pair Corralation between State Street and Prudential Jennison
Considering the 90-day investment horizon State Street Corp is expected to generate 1.77 times more return on investment than Prudential Jennison. However, State Street is 1.77 times more volatile than Prudential Jennison International. It trades about 0.0 of its potential returns per unit of risk. Prudential Jennison International is currently generating about -0.47 per unit of risk. If you would invest 7,316 in State Street Corp on January 20, 2024 and sell it today you would lose (12.00) from holding State Street Corp or give up 0.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Corp vs. Prudential Jennison Internatio
Performance |
| Timeline |
| State Street Corp |
| Prudential Jennison |
State Street and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Prudential Jennison
The main advantage of trading using opposite State Street and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Prudential Jennison 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 Jennison will offset losses from the drop in Prudential Jennison's long position.| State Street vs. Northern Trust | State Street vs. Franklin Resources | State Street vs. Invesco Plc | State Street vs. T Rowe Price |
| Prudential Jennison vs. Prudential Jennison Global | Prudential Jennison vs. Prudential Jennison Emerging | Prudential Jennison vs. Brown Advisory Sustainable | Prudential Jennison vs. Prudential High Yield |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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