Correlation Between Sprott Gold and Prudential Commodity

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

Diversification Opportunities for Sprott Gold and Prudential Commodity

0.61

Correlation Coefficient

Sprott Gold  Prudential Commodity

Poor diversification

The 3 months correlation between Sprott and Prudential is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Gold Equity and Prudential Commodity Strategie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Commodity 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 Commodity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Commodity has no effect on the direction of Sprott Gold i.e., Sprott Gold and Prudential Commodity go up and down completely randomly.

Pair Corralation between Sprott Gold and Prudential Commodity

Assuming the 90 days horizon Sprott Gold Equity is expected to under-perform the Prudential Commodity. In addition to that, Sprott Gold is 1.56 times more volatile than Prudential Commodity Strategies. It trades about -0.21 of its total potential returns per unit of risk. Prudential Commodity Strategies is currently generating about -0.17 per unit of volatility. If you would invest  683.00  in Prudential Commodity Strategies on September 29, 2024 and sell it today you would lose (27.00) from holding Prudential Commodity Strategies or give up 3.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Sprott Gold Equity  vs.  Prudential Commodity Strategie

Sprott Gold Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Gold Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest sluggish performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Prudential Commodity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Commodity Strategies has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Prudential Commodity 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 Commodity

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

The idea behind Sprott Gold Equity and Prudential Commodity Strategies 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.