Correlation Between Dow Jones and Drdgold
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Drdgold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Drdgold, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Drdgold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Drdgold.
Diversification Opportunities for Dow Jones and Drdgold
Good diversification
The 3 months correlation between Dow and Drdgold is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Drdgold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drdgold and Dow Jones 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 Dow Jones Industrial 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 has no effect on the direction of Dow Jones i.e., Dow Jones and Drdgold go up and down completely randomly.
Pair Corralation between Dow Jones and Drdgold
Assuming the 90 days trading horizon Dow Jones is expected to generate 3.04 times less return on investment than Drdgold. But when comparing it to its historical volatility, Dow Jones Industrial is 4.87 times less risky than Drdgold. It trades about 0.08 of its potential returns per unit of risk. Drdgold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 72.00 in Drdgold on October 20, 2024 and sell it today you would earn a total of 24.00 from holding Drdgold or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 53.83% |
| Values | Daily Returns |
Dow Jones Industrial vs. Drdgold
Performance |
| Timeline |
Dow Jones and Drdgold Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Drdgold
Pair trading matchups for Drdgold
Pair Trading with Dow Jones and Drdgold
The main advantage of trading using opposite Dow Jones and Drdgold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aluminum of | Dow Jones vs. Adtalem Global Education | Dow Jones vs. East Africa Metals | Dow Jones vs. Western Copper and |
| Drdgold vs. Alkane Resources Limited | Drdgold vs. Evolution Mining | Drdgold vs. Dundee Precious Metals | Drdgold vs. Northern Star Resources |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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