Correlation Between First Eagle and Prudential Jennison

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

By analyzing existing cross correlation between First Eagle High and Prudential Jennison International, you can compare the effects of market volatilities on First Eagle 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 First Eagle with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Eagle and Prudential Jennison.

Diversification Opportunities for First Eagle and Prudential Jennison

0.85

Correlation Coefficient

First Eagle  Prudential Jennison

Very poor diversification

The 3 months correlation between First and Prudential is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Eagle High and Prudential Jennison Internatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and First Eagle 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 First Eagle High 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 First Eagle i.e., First Eagle and Prudential Jennison go up and down completely randomly.

Pair Corralation between First Eagle and Prudential Jennison

Assuming the 90 days horizon First Eagle High is expected to generate 0.3 times more return on investment than Prudential Jennison. However, First Eagle High is 3.33 times less risky than Prudential Jennison. It trades about -0.11 of its potential returns per unit of risk. Prudential Jennison International is currently generating about -0.28 per unit of risk. If you would invest  833.00  in First Eagle High on January 17, 2024 and sell it today you would lose (5.00) from holding First Eagle High or give up 0.6% of portfolio value over 90 days.

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

First Eagle High  vs.  Prudential Jennison Internatio

First Eagle High

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle High are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First Eagle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Jennison

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison International are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Jennison may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with First Eagle and Prudential Jennison

The main advantage of trading using opposite First Eagle and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Eagle 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.

The idea behind First Eagle High and Prudential Jennison International 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.