Correlation Between Gold Terra and DRDGOLD Limited
Can any of the company-specific risk be diversified away by investing in both Gold Terra 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 Gold Terra and DRDGOLD Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Terra Resource and DRDGOLD Limited ADR, you can compare the effects of market volatilities on Gold Terra 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 Gold Terra with a short position of DRDGOLD Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Terra and DRDGOLD Limited.
Diversification Opportunities for Gold Terra and DRDGOLD Limited
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gold and DRDGOLD is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gold Terra Resource 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 Gold Terra 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 Gold Terra Resource 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 Gold Terra i.e., Gold Terra and DRDGOLD Limited go up and down completely randomly.
Pair Corralation between Gold Terra and DRDGOLD Limited
Assuming the 90 days horizon Gold Terra Resource is expected to generate 0.88 times more return on investment than DRDGOLD Limited. However, Gold Terra Resource is 1.13 times less risky than DRDGOLD Limited. It trades about 0.06 of its potential returns per unit of risk. DRDGOLD Limited ADR is currently generating about -0.24 per unit of risk. If you would invest 4.07 in Gold Terra Resource on August 29, 2024 and sell it today you would earn a total of 0.13 from holding Gold Terra Resource or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Terra Resource vs. DRDGOLD Limited ADR
Performance |
| Timeline |
| Gold Terra Resource |
| DRDGOLD Limited ADR |
Gold Terra and DRDGOLD Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Terra and DRDGOLD Limited
The main advantage of trading using opposite Gold Terra and DRDGOLD Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Terra 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.| Gold Terra vs. Vertiv Holdings Co | Gold Terra vs. Nasdaq Inc | Gold Terra vs. McDonalds | Gold Terra vs. Walmart |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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