Correlation Between Ford and DRDGOLD
Can any of the company-specific risk be diversified away by investing in both Ford and DRDGOLD 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 Ford and DRDGOLD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and DRDGOLD Limited, you can compare the effects of market volatilities on Ford and DRDGOLD 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 Ford with a short position of DRDGOLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and DRDGOLD.
Diversification Opportunities for Ford and DRDGOLD
Average diversification
The 3 months correlation between Ford and DRDGOLD is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and DRDGOLD Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRDGOLD Limited and Ford 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 Ford Motor are associated (or correlated) with DRDGOLD. 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 has no effect on the direction of Ford i.e., Ford and DRDGOLD go up and down completely randomly.
Pair Corralation between Ford and DRDGOLD
Taking into account the 90-day investment horizon Ford is expected to generate 5.29 times less return on investment than DRDGOLD. But when comparing it to its historical volatility, Ford Motor is 1.17 times less risky than DRDGOLD. It trades about 0.01 of its potential returns per unit of risk. DRDGOLD Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 117,634 in DRDGOLD Limited on September 2, 2024 and sell it today you would earn a total of 59,366 from holding DRDGOLD Limited or generate 50.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Ford Motor vs. DRDGOLD Limited
Performance |
| Timeline |
| Ford Motor |
| DRDGOLD Limited |
Ford and DRDGOLD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and DRDGOLD
The main advantage of trading using opposite Ford and DRDGOLD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, DRDGOLD 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 will offset losses from the drop in DRDGOLD's long position.The idea behind Ford Motor and DRDGOLD Limited 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.| DRDGOLD vs. Kumba Iron Ore | DRDGOLD vs. Deneb Investments | DRDGOLD vs. HomeChoice Investments | DRDGOLD vs. Capitec Bank Holdings |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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