Correlation Between DRDGOLD Limited and Northern Star
Can any of the company-specific risk be diversified away by investing in both DRDGOLD Limited and Northern Star 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 Limited and Northern Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DRDGOLD Limited ADR and Northern Star Resources, you can compare the effects of market volatilities on DRDGOLD Limited and Northern Star 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 Limited with a short position of Northern Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of DRDGOLD Limited and Northern Star.
Diversification Opportunities for DRDGOLD Limited and Northern Star
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DRDGOLD and Northern is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited ADR and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources and DRDGOLD Limited 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 ADR are associated (or correlated) with Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of DRDGOLD Limited i.e., DRDGOLD Limited and Northern Star go up and down completely randomly.
Pair Corralation between DRDGOLD Limited and Northern Star
Considering the 90-day investment horizon DRDGOLD Limited is expected to generate 1.08 times less return on investment than Northern Star. But when comparing it to its historical volatility, DRDGOLD Limited ADR is 1.16 times less risky than Northern Star. It trades about 0.04 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 770.00 in Northern Star Resources on November 2, 2024 and sell it today you would earn a total of 330.00 from holding Northern Star Resources or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.7% |
| Values | Daily Returns |
DRDGOLD Limited ADR vs. Northern Star Resources
Performance |
| Timeline |
| DRDGOLD Limited ADR |
| Northern Star Resources |
DRDGOLD Limited and Northern Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DRDGOLD Limited and Northern Star
The main advantage of trading using opposite DRDGOLD Limited and Northern Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRDGOLD Limited position performs unexpectedly, Northern Star 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 Northern Star will offset losses from the drop in Northern Star's long position.| DRDGOLD Limited vs. Osisko Gold Ro | DRDGOLD Limited vs. Eldorado Gold Corp | DRDGOLD Limited vs. SSR Mining | DRDGOLD Limited vs. Idaho Strategic Resources |
| Northern Star vs. Regis Resources | Northern Star vs. West African Resources | Northern Star vs. Dundee Precious Metals | Northern Star vs. Maple Gold Mines |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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