Correlation Between GoldMining and Prudential Financial

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

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

Diversification Opportunities for GoldMining and Prudential Financial

0.32

Correlation Coefficient

GoldMining  Prudential Financial

Weak diversification

The 3 months correlation between GoldMining and Prudential is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and GoldMining 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 GoldMining are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of GoldMining i.e., GoldMining and Prudential Financial go up and down completely randomly.

Pair Corralation between GoldMining and Prudential Financial

Assuming the 90 days trading horizon GoldMining is expected to under-perform the Prudential Financial. In addition to that, GoldMining is 1.78 times more volatile than Prudential Financial. It trades about -0.07 of its total potential returns per unit of risk. Prudential Financial is currently generating about 0.05 per unit of volatility. If you would invest  11,635  in Prudential Financial on September 14, 2024 and sell it today you would earn a total of  483.00  from holding Prudential Financial or generate 4.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	67.19%
Values	Daily Returns

GoldMining  vs.  Prudential Financial

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Prudential Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Prudential Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GoldMining and Prudential Financial

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

The idea behind GoldMining and Prudential Financial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.