Correlation Between African Media and DRDGOLD
Can any of the company-specific risk be diversified away by investing in both African Media and DRDGOLD 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 African Media and DRDGOLD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Media Entertainment and DRDGOLD Limited, you can compare the effects of market volatilities on African Media and DRDGOLD 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 African Media with a short position of DRDGOLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Media and DRDGOLD.
Diversification Opportunities for African Media and DRDGOLD
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between African and DRDGOLD is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding African Media Entertainment and DRDGOLD Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRDGOLD Limited and African Media 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 African Media Entertainment are associated (or correlated) with DRDGOLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRDGOLD Limited has no effect on the direction of African Media i.e., African Media and DRDGOLD go up and down completely randomly.
Pair Corralation between African Media and DRDGOLD
Assuming the 90 days trading horizon African Media Entertainment is expected to generate 16.98 times more return on investment than DRDGOLD. However, African Media is 16.98 times more volatile than DRDGOLD Limited. It trades about 0.04 of its potential returns per unit of risk. DRDGOLD Limited is currently generating about 0.04 per unit of risk. If you would invest 313,314 in African Media Entertainment on September 12, 2024 and sell it today you would earn a total of 96,686 from holding African Media Entertainment or generate 30.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
African Media Entertainment vs. DRDGOLD Limited
Performance |
| Timeline |
| African Media Entert |
| DRDGOLD Limited |
African Media and DRDGOLD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Media and DRDGOLD
The main advantage of trading using opposite African Media and DRDGOLD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Media position performs unexpectedly, DRDGOLD 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 DRDGOLD will offset losses from the drop in DRDGOLD's long position.| African Media vs. Sasol Ltd Bee | African Media vs. Centaur Bci Balanced | African Media vs. Sabvest Capital | African Media vs. Growthpoint Properties |
| DRDGOLD vs. African Media Entertainment | DRDGOLD vs. Deneb Investments | DRDGOLD vs. Kumba Iron Ore | DRDGOLD vs. MC Mining |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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