Correlation Between Life Healthcare and DRDGOLD
Can any of the company-specific risk be diversified away by investing in both Life Healthcare 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 Life Healthcare and DRDGOLD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Healthcare and DRDGOLD Limited, you can compare the effects of market volatilities on Life Healthcare 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 Life Healthcare with a short position of DRDGOLD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Healthcare and DRDGOLD.
Diversification Opportunities for Life Healthcare and DRDGOLD
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Life and DRDGOLD is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Life Healthcare and DRDGOLD Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRDGOLD Limited and Life Healthcare 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 Life Healthcare 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 Life Healthcare i.e., Life Healthcare and DRDGOLD go up and down completely randomly.
Pair Corralation between Life Healthcare and DRDGOLD
Assuming the 90 days trading horizon Life Healthcare is expected to generate 1.36 times less return on investment than DRDGOLD. But when comparing it to its historical volatility, Life Healthcare is 1.38 times less risky than DRDGOLD. It trades about 0.14 of its potential returns per unit of risk. DRDGOLD Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 142,000 in DRDGOLD Limited on September 4, 2024 and sell it today you would earn a total of 32,700 from holding DRDGOLD Limited or generate 23.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Life Healthcare vs. DRDGOLD Limited
Performance |
| Timeline |
| Life Healthcare |
| DRDGOLD Limited |
Life Healthcare and DRDGOLD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Life Healthcare and DRDGOLD
The main advantage of trading using opposite Life Healthcare and DRDGOLD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Healthcare 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.| Life Healthcare vs. Netcare | Life Healthcare vs. Sasol Ltd Bee | Life Healthcare vs. Centaur Bci Balanced | Life Healthcare vs. Growthpoint Properties |
| DRDGOLD vs. Life Healthcare | DRDGOLD vs. AfroCentric Investment Corp | DRDGOLD vs. Zeder Investments | DRDGOLD vs. Hosken Consolidated Investments |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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