Correlation Between Prudential Jennison and The Arbitrage

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

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

Diversification Opportunities for Prudential Jennison and The Arbitrage

0.91

Correlation Coefficient

Prudential Jennison  The Arbitrage

Almost no diversification

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

Pair Corralation between Prudential Jennison and The Arbitrage

Assuming the 90 days horizon Prudential Jennison Small is expected to generate 13.41 times more return on investment than The Arbitrage. However, Prudential Jennison is 13.41 times more volatile than The Arbitrage Credit. It trades about 0.12 of its potential returns per unit of risk. The Arbitrage Credit is currently generating about 0.15 per unit of risk. If you would invest  1,758  in Prudential Jennison Small on May 3, 2025 and sell it today you would earn a total of  109.00  from holding Prudential Jennison Small or generate 6.2% 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 Small  vs.  The Arbitrage Credit

Prudential Jennison Small

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Small 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 September 2025.

Arbitrage Credit

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Arbitrage Credit are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, The Arbitrage 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 The Arbitrage

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

The idea behind Prudential Jennison Small and The Arbitrage Credit 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.