Correlation Between Northern Star and DRDGOLD Limited
Can any of the company-specific risk be diversified away by investing in both Northern Star 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 Northern Star and DRDGOLD Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Star Resources and DRDGOLD Limited ADR, you can compare the effects of market volatilities on Northern Star 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 Northern Star with a short position of DRDGOLD Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Star and DRDGOLD Limited.
Diversification Opportunities for Northern Star and DRDGOLD Limited
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and DRDGOLD is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources 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 Northern Star 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 Northern Star Resources 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 Northern Star i.e., Northern Star and DRDGOLD Limited go up and down completely randomly.
Pair Corralation between Northern Star and DRDGOLD Limited
Assuming the 90 days horizon Northern Star Resources is expected to generate 1.18 times more return on investment than DRDGOLD Limited. However, Northern Star is 1.18 times more volatile than DRDGOLD Limited ADR. It trades about 0.03 of its potential returns per unit of risk. DRDGOLD Limited ADR is currently generating about 0.03 per unit of risk. If you would invest 820.00 in Northern Star Resources on October 21, 2024 and sell it today you would earn a total of 205.00 from holding Northern Star Resources or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.94% |
| Values | Daily Returns |
Northern Star Resources vs. DRDGOLD Limited ADR
Performance |
| Timeline |
| Northern Star Resources |
| DRDGOLD Limited ADR |
Northern Star and DRDGOLD Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Star and DRDGOLD Limited
The main advantage of trading using opposite Northern Star and DRDGOLD Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star 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.| Northern Star vs. Regis Resources | Northern Star vs. West African Resources | Northern Star vs. Dundee Precious Metals | Northern Star vs. Maple Gold Mines |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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