Correlation Between Prudential Jennison and Gmo Quality

Can any of the company-specific risk be diversified away by investing in both Prudential Jennison and Gmo Quality 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 Gmo Quality 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 Gmo Quality Fund, you can compare the effects of market volatilities on Prudential Jennison and Gmo Quality 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 Gmo Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Jennison and Gmo Quality.

Diversification Opportunities for Prudential Jennison and Gmo Quality

0.72

Correlation Coefficient

Prudential Jennison  Gmo Quality

Poor diversification

The 3 months correlation between Prudential and Gmo is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Small and Gmo Quality Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Quality Fund 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 Gmo Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Quality Fund has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and Gmo Quality go up and down completely randomly.

Pair Corralation between Prudential Jennison and Gmo Quality

Assuming the 90 days horizon Prudential Jennison Small is expected to under-perform the Gmo Quality. In addition to that, Prudential Jennison is 1.65 times more volatile than Gmo Quality Fund. It trades about -0.21 of its total potential returns per unit of risk. Gmo Quality Fund is currently generating about -0.35 per unit of volatility. If you would invest  3,449  in Gmo Quality Fund on May 4, 2025 and sell it today you would lose (123.00) from holding Gmo Quality Fund or give up 3.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Prudential Jennison Small  vs.  Gmo Quality Fund

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 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Jennison is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gmo Quality Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gmo Quality Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Gmo Quality 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 Gmo Quality

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

The idea behind Prudential Jennison Small and Gmo Quality Fund 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.