Correlation Between Prudential Jennison and First American

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

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

Diversification Opportunities for Prudential Jennison and First American

-0.46

Correlation Coefficient

Prudential Jennison  First American

Very good diversification

The 3 months correlation between Prudential and First is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Jennison Equity and First American Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Investment 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 Equity are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Investment has no effect on the direction of Prudential Jennison i.e., Prudential Jennison and First American go up and down completely randomly.

Pair Corralation between Prudential Jennison and First American

Assuming the 90 days horizon Prudential Jennison Equity is expected to generate 0.6 times more return on investment than First American. However, Prudential Jennison Equity is 1.68 times less risky than First American. It trades about 0.11 of its potential returns per unit of risk. First American Investment is currently generating about -0.06 per unit of risk. If you would invest  2,333  in Prudential Jennison Equity on August 26, 2025 and sell it today you would earn a total of  110.00  from holding Prudential Jennison Equity or generate 4.71% return on investment over 90 days.

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

Prudential Jennison Equity  vs.  First American Investment

Prudential Jennison

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Jennison Equity are ranked lower than 8 (%) 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.

First American Investment

Risk-Adjusted Performance

Weakest

Over the last 90 days First American Investment has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, First American 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 First American

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

The idea behind Prudential Jennison Equity and First American Investment 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 Global Correlations module to find global opportunities by holding instruments from different markets.