Correlation Between Dundee Precious and Gold Fields

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

Diversification Opportunities for Dundee Precious and Gold Fields

DundeeGoldDiversified AwayDundeeGoldDiversified Away100%
0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Dundee and Gold is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dundee Precious Metals and Gold Fields Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields 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 Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of Dundee Precious i.e., Dundee Precious and Gold Fields go up and down completely randomly.

Pair Corralation between Dundee Precious and Gold Fields

Assuming the 90 days horizon Dundee Precious is expected to generate 1.35 times less return on investment than Gold Fields. But when comparing it to its historical volatility, Dundee Precious Metals is 1.43 times less risky than Gold Fields. It trades about 0.1 of its potential returns per unit of risk. Gold Fields Ltd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,558  in Gold Fields Ltd on November 23, 2024 and sell it today you would earn a total of  362.00  from holding Gold Fields Ltd or generate 23.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Dundee Precious Metals  vs.  Gold Fields Ltd

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 010203040
JavaScript chart by amCharts 3.21.15DPMLF GFI
       Timeline  
Dundee Precious Metals 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dundee Precious Metals are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Dundee Precious reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb99.51010.51111.512
Gold Fields 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields Ltd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gold Fields demonstrated solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb13141516171819

Dundee Precious and Gold Fields Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.36-4.02-2.67-1.320.02241.513.054.596.13 0.020.040.060.080.100.12
JavaScript chart by amCharts 3.21.15DPMLF GFI
       Returns  

Pair Trading with Dundee Precious and Gold Fields

The main advantage of trading using opposite Dundee Precious and Gold Fields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dundee Precious position performs unexpectedly, Gold Fields 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 Gold Fields will offset losses from the drop in Gold Fields' long position.
The idea behind Dundee Precious Metals and Gold Fields Ltd 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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