Correlation Between Franco Nevada and DRDGOLD Limited
Can any of the company-specific risk be diversified away by investing in both Franco Nevada and DRDGOLD Limited 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 Franco Nevada and DRDGOLD Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Franco Nevada and DRDGOLD Limited ADR, you can compare the effects of market volatilities on Franco Nevada and DRDGOLD Limited 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 Franco Nevada with a short position of DRDGOLD Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franco Nevada and DRDGOLD Limited.
Diversification Opportunities for Franco Nevada and DRDGOLD Limited
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Franco and DRDGOLD is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Franco Nevada and DRDGOLD Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRDGOLD Limited ADR and Franco Nevada 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 Franco Nevada are associated (or correlated) with DRDGOLD Limited. 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 ADR has no effect on the direction of Franco Nevada i.e., Franco Nevada and DRDGOLD Limited go up and down completely randomly.
Pair Corralation between Franco Nevada and DRDGOLD Limited
Considering the 90-day investment horizon Franco Nevada is expected to generate 0.56 times more return on investment than DRDGOLD Limited. However, Franco Nevada is 1.8 times less risky than DRDGOLD Limited. It trades about -0.22 of its potential returns per unit of risk. DRDGOLD Limited ADR is currently generating about -0.29 per unit of risk. If you would invest 13,715 in Franco Nevada on August 30, 2024 and sell it today you would lose (1,419) from holding Franco Nevada or give up 10.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Franco Nevada vs. DRDGOLD Limited ADR
Performance |
| Timeline |
| Franco Nevada |
| DRDGOLD Limited ADR |
Franco Nevada and DRDGOLD Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Franco Nevada and DRDGOLD Limited
The main advantage of trading using opposite Franco Nevada and DRDGOLD Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franco Nevada position performs unexpectedly, DRDGOLD Limited 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 Limited will offset losses from the drop in DRDGOLD Limited's long position.| Franco Nevada vs. Royal Gold | Franco Nevada vs. Agnico Eagle Mines | Franco Nevada vs. Pan American Silver | Franco Nevada vs. Sandstorm Gold Ltd |
| DRDGOLD Limited vs. Franco Nevada | DRDGOLD Limited vs. Osisko Gold Ro | DRDGOLD Limited vs. Sandstorm Gold Ltd | DRDGOLD Limited vs. Royal Gold |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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