Correlation Between Prudential Financial and New Gold

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

By analyzing existing cross correlation between Prudential Financial 4125 and New Gold, you can compare the effects of market volatilities on Prudential Financial and New Gold 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 Financial with a short position of New Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and New Gold.

Diversification Opportunities for Prudential Financial and New Gold

-0.28

Correlation Coefficient

Prudential Financial  New Gold

Very good diversification

The 3 months correlation between Prudential and New is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial 4125 and New Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Gold and Prudential Financial 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 Financial 4125 are associated (or correlated) with New Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Gold has no effect on the direction of Prudential Financial i.e., Prudential Financial and New Gold go up and down completely randomly.

Pair Corralation between Prudential Financial and New Gold

Considering the 90-day investment horizon Prudential Financial 4125 is expected to under-perform the New Gold. But the stock apears to be less risky and, when comparing its historical volatility, Prudential Financial 4125 is 2.95 times less risky than New Gold. The stock trades about -0.02 of its potential returns per unit of risk. The New Gold is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  247.00  in New Gold on December 28, 2024 and sell it today you would earn a total of  113.00  from holding New Gold or generate 45.75% return on investment over 90 days.

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

Prudential Financial 4125  vs.  New Gold

Prudential Financial 4125

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Financial 4125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Prudential Financial is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

New Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Gold are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, New Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prudential Financial and New Gold

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

The idea behind Prudential Financial 4125 and New Gold 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.