Correlation Between DRDGOLD and Kumba Iron
Can any of the company-specific risk be diversified away by investing in both DRDGOLD and Kumba Iron 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 DRDGOLD and Kumba Iron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DRDGOLD Limited and Kumba Iron Ore, you can compare the effects of market volatilities on DRDGOLD and Kumba Iron 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 DRDGOLD with a short position of Kumba Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of DRDGOLD and Kumba Iron.
Diversification Opportunities for DRDGOLD and Kumba Iron
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between DRDGOLD and Kumba is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited and Kumba Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumba Iron Ore and DRDGOLD 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 DRDGOLD Limited are associated (or correlated) with Kumba Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumba Iron Ore has no effect on the direction of DRDGOLD i.e., DRDGOLD and Kumba Iron go up and down completely randomly.
Pair Corralation between DRDGOLD and Kumba Iron
Assuming the 90 days trading horizon DRDGOLD Limited is expected to under-perform the Kumba Iron. In addition to that, DRDGOLD is 1.2 times more volatile than Kumba Iron Ore. It trades about -0.37 of its total potential returns per unit of risk. Kumba Iron Ore is currently generating about -0.06 per unit of volatility. If you would invest 3,426,500 in Kumba Iron Ore on September 2, 2024 and sell it today you would lose (100,800) from holding Kumba Iron Ore or give up 2.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DRDGOLD Limited vs. Kumba Iron Ore
Performance |
| Timeline |
| DRDGOLD Limited |
| Kumba Iron Ore |
DRDGOLD and Kumba Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DRDGOLD and Kumba Iron
The main advantage of trading using opposite DRDGOLD and Kumba Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRDGOLD position performs unexpectedly, Kumba Iron 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 Kumba Iron will offset losses from the drop in Kumba Iron's long position.| DRDGOLD vs. Kumba Iron Ore | DRDGOLD vs. Deneb Investments | DRDGOLD vs. HomeChoice Investments | DRDGOLD vs. Capitec Bank Holdings |
| Kumba Iron vs. Datatec | Kumba Iron vs. Kap Industrial Holdings | Kumba Iron vs. HomeChoice Investments | Kumba Iron vs. Lesaka Technologies |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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