Correlation Between Sprott Gold and Prudential Income

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

By analyzing existing cross correlation between Sprott Gold Equity and Prudential Income Builder, you can compare the effects of market volatilities on Sprott Gold and Prudential Income 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 Sprott Gold with a short position of Prudential Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Gold and Prudential Income.

Diversification Opportunities for Sprott Gold and Prudential Income

-0.14

Correlation Coefficient

Sprott Gold  Prudential Income

Good diversification

The 3 months correlation between Sprott and Prudential is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Prudential Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Income Builder and Sprott Gold 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 Sprott Gold Equity are associated (or correlated) with Prudential Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Income Builder has no effect on the direction of Sprott Gold i.e., Sprott Gold and Prudential Income go up and down completely randomly.

Pair Corralation between Sprott Gold and Prudential Income

Assuming the 90 days horizon Sprott Gold Equity is expected to generate 4.95 times more return on investment than Prudential Income. However, Sprott Gold is 4.95 times more volatile than Prudential Income Builder. It trades about 0.02 of its potential returns per unit of risk. Prudential Income Builder is currently generating about 0.06 per unit of risk. If you would invest  5,694  in Sprott Gold Equity on September 14, 2024 and sell it today you would earn a total of  87.00  from holding Sprott Gold Equity or generate 1.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sprott Gold Equity  vs.  Prudential Income Builder

Sprott Gold Equity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Gold Equity are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Sprott Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prudential Income Builder

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Income Builder are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sprott Gold and Prudential Income

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

The idea behind Sprott Gold Equity and Prudential Income Builder 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.