Correlation Between Prudential Jennison and IShares Global

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

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

Diversification Opportunities for Prudential Jennison and IShares Global

0.99

Correlation Coefficient

Prudential Jennison  IShares Global

No risk reduction

The 3 months correlation between Prudential and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Financial and iShares Global Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Financials 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 Financial are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Financials has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and IShares Global go up and down completely randomly.

Pair Corralation between Prudential Jennison and IShares Global

Assuming the 90 days horizon Prudential Jennison Financial is expected to generate 1.21 times more return on investment than IShares Global. However, Prudential Jennison is 1.21 times more volatile than iShares Global Financials. It trades about -0.03 of its potential returns per unit of risk. iShares Global Financials is currently generating about -0.04 per unit of risk. If you would invest  2,131  in Prudential Jennison Financial on January 25, 2024 and sell it today you would lose (17.00) from holding Prudential Jennison Financial or give up 0.8% 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 Financial  vs.  iShares Global Financials

Prudential Jennison

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Financial 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.

iShares Global Financials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Financials are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, IShares Global may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Prudential Jennison and IShares Global

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

The idea behind Prudential Jennison Financial and iShares Global Financials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.