Correlation Between DRDGOLD and Life Healthcare
Can any of the company-specific risk be diversified away by investing in both DRDGOLD and Life Healthcare 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 Life Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DRDGOLD Limited and Life Healthcare, you can compare the effects of market volatilities on DRDGOLD and Life Healthcare 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 Life Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of DRDGOLD and Life Healthcare.
Diversification Opportunities for DRDGOLD and Life Healthcare
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DRDGOLD and Life is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited and Life Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Healthcare 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 Life Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Healthcare has no effect on the direction of DRDGOLD i.e., DRDGOLD and Life Healthcare go up and down completely randomly.
Pair Corralation between DRDGOLD and Life Healthcare
Assuming the 90 days trading horizon DRDGOLD Limited is expected to under-perform the Life Healthcare. In addition to that, DRDGOLD is 1.53 times more volatile than Life Healthcare. It trades about -0.31 of its total potential returns per unit of risk. Life Healthcare is currently generating about 0.05 per unit of volatility. If you would invest 165,000 in Life Healthcare on September 4, 2024 and sell it today you would earn a total of 2,300 from holding Life Healthcare or generate 1.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DRDGOLD Limited vs. Life Healthcare
Performance |
| Timeline |
| DRDGOLD Limited |
| Life Healthcare |
DRDGOLD and Life Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DRDGOLD and Life Healthcare
The main advantage of trading using opposite DRDGOLD and Life Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRDGOLD position performs unexpectedly, Life Healthcare 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 Life Healthcare will offset losses from the drop in Life Healthcare's long position.| DRDGOLD vs. Life Healthcare | DRDGOLD vs. AfroCentric Investment Corp | DRDGOLD vs. Zeder Investments | DRDGOLD vs. Hosken Consolidated Investments |
| Life Healthcare vs. Netcare | Life Healthcare vs. Sasol Ltd Bee | Life Healthcare vs. Centaur Bci Balanced | Life Healthcare vs. Growthpoint Properties |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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