Correlation Between Prudential Jennison and Global Equity

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

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

Diversification Opportunities for Prudential Jennison and Global Equity

0.91

Correlation Coefficient

Prudential Jennison  Global Equity

Almost no diversification

The 3 months correlation between Prudential and Global is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Global and Global Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Equity Portfolio 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 Global are associated (or correlated) with Global Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Equity Portfolio has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Global Equity go up and down completely randomly.

Pair Corralation between Prudential Jennison and Global Equity

Assuming the 90 days horizon Prudential Jennison Global is expected to generate 1.41 times more return on investment than Global Equity. However, Prudential Jennison is 1.41 times more volatile than Global Equity Portfolio. It trades about 0.04 of its potential returns per unit of risk. Global Equity Portfolio is currently generating about 0.03 per unit of risk. If you would invest  3,413  in Prudential Jennison Global on January 18, 2024 and sell it today you would earn a total of  942.00  from holding Prudential Jennison Global or generate 27.6% return on investment over 90 days.

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

Prudential Jennison Global  vs.  Global Equity Portfolio

Prudential Jennison

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Global are ranked lower than 9 (%) 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.

Global Equity Portfolio

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Equity Portfolio are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Global Equity 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 Global Equity

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

The idea behind Prudential Jennison Global and Global Equity Portfolio 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.