Correlation Between Dundee Precious and DRDGOLD Limited
Can any of the company-specific risk be diversified away by investing in both Dundee Precious and DRDGOLD Limited 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 Dundee Precious and DRDGOLD Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dundee Precious Metals and DRDGOLD Limited ADR, you can compare the effects of market volatilities on Dundee Precious and DRDGOLD Limited 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 Dundee Precious with a short position of DRDGOLD Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dundee Precious and DRDGOLD Limited.
Diversification Opportunities for Dundee Precious and DRDGOLD Limited
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dundee and DRDGOLD is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dundee Precious Metals and DRDGOLD Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRDGOLD Limited ADR and Dundee Precious 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 Dundee Precious Metals are associated (or correlated) with DRDGOLD Limited. 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 ADR has no effect on the direction of Dundee Precious i.e., Dundee Precious and DRDGOLD Limited go up and down completely randomly.
Pair Corralation between Dundee Precious and DRDGOLD Limited
Assuming the 90 days horizon Dundee Precious Metals is expected to generate 0.7 times more return on investment than DRDGOLD Limited. However, Dundee Precious Metals is 1.43 times less risky than DRDGOLD Limited. It trades about 0.06 of its potential returns per unit of risk. DRDGOLD Limited ADR is currently generating about 0.04 per unit of risk. If you would invest 580.00 in Dundee Precious Metals on November 2, 2024 and sell it today you would earn a total of 438.00 from holding Dundee Precious Metals or generate 75.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dundee Precious Metals vs. DRDGOLD Limited ADR
Performance |
| Timeline |
| Dundee Precious Metals |
| DRDGOLD Limited ADR |
Dundee Precious and DRDGOLD Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dundee Precious and DRDGOLD Limited
The main advantage of trading using opposite Dundee Precious and DRDGOLD Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dundee Precious position performs unexpectedly, DRDGOLD Limited 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 Limited will offset losses from the drop in DRDGOLD Limited's long position.| Dundee Precious vs. Hummingbird Resources PLC | Dundee Precious vs. Artemis Gold | Dundee Precious vs. Precipitate Gold Corp | Dundee Precious vs. American Eagle Gold |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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