Correlation Between Prudential High and Global Gold
Can any of the company-specific risk be diversified away by investing in both Prudential High and Global 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 High and Global Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential High Yield and Global Gold Fund, you can compare the effects of market volatilities on Prudential High and Global 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 High with a short position of Global Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential High and Global Gold.
Diversification Opportunities for Prudential High and Global Gold
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Prudential and Global is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Prudential High Yield and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund and Prudential High 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 High Yield are associated (or correlated) with Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Prudential High i.e., Prudential High and Global Gold go up and down completely randomly.
Pair Corralation between Prudential High and Global Gold
Assuming the 90 days horizon Prudential High is expected to generate 7.29 times less return on investment than Global Gold. But when comparing it to its historical volatility, Prudential High Yield is 5.77 times less risky than Global Gold. It trades about 0.33 of its potential returns per unit of risk. Global Gold Fund is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 1,180 in Global Gold Fund on October 28, 2024 and sell it today you would earn a total of 131.00 from holding Global Gold Fund or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential High Yield vs. Global Gold Fund
Performance |
| Timeline |
| Prudential High Yield |
| Global Gold Fund |
Prudential High and Global Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential High and Global Gold
The main advantage of trading using opposite Prudential High and Global Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential High position performs unexpectedly, Global 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 Global Gold will offset losses from the drop in Global Gold's long position.| Prudential High vs. Doubleline Emerging Markets | Prudential High vs. Wasatch Frontier Emerging | Prudential High vs. Embark Commodity Strategy | Prudential High vs. Siit Emerging Markets |
| Global Gold vs. Vela Short Duration | Global Gold vs. Oakhurst Short Duration | Global Gold vs. Federated Government Ultrashort | Global Gold vs. Aamhimco Short Duration |
Check out your portfolio center.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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