Correlation Between Europacific Growth and Prudential Jennison

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Can any of the company-specific risk be diversified away by investing in both Europacific Growth 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 Europacific Growth and Prudential Jennison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Europacific Growth Fund and Prudential Jennison International, you can compare the effects of market volatilities on Europacific Growth 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 Europacific Growth with a short position of Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Europacific Growth and Prudential Jennison.

Diversification Opportunities for Europacific Growth and Prudential Jennison

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Europacific and Prudential is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding EUROPACIFIC GROWTH FUND and PRUDENTIAL JENNISON INTERNATIO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison and Europacific Growth 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 Europacific Growth Fund 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 Europacific Growth i.e., Europacific Growth and Prudential Jennison go up and down completely randomly.

Pair Corralation between Europacific Growth and Prudential Jennison

Assuming the 90 days horizon Europacific Growth is expected to generate 1.05 times less return on investment than Prudential Jennison. But when comparing it to its historical volatility, Europacific Growth Fund is 1.26 times less risky than Prudential Jennison. It trades about 0.03 of its potential returns per unit of risk. Prudential Jennison International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,826  in Prudential Jennison International on December 30, 2023 and sell it today you would earn a total of  336.00  from holding Prudential Jennison International or generate 11.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

EUROPACIFIC GROWTH FUND  vs.  PRUDENTIAL JENNISON INTERNATIO

 Performance 
       Timeline  
Europacific Growth Fund 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Europacific Growth Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Europacific Growth may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Prudential Jennison 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison International are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Jennison showed solid returns over the last few months and may actually be approaching a breakup point.

Europacific Growth and Prudential Jennison Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Europacific Growth and Prudential Jennison

The main advantage of trading using opposite Europacific Growth and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europacific Growth 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 Europacific Growth Fund 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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