Correlation Between DRDGOLD and AngloGold Ashanti

Can any of the company-specific risk be diversified away by investing in both DRDGOLD and AngloGold Ashanti 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 DRDGOLD and AngloGold Ashanti into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DRDGOLD Limited and AngloGold Ashanti, you can compare the effects of market volatilities on DRDGOLD and AngloGold Ashanti 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 DRDGOLD with a short position of AngloGold Ashanti. Check out your portfolio center. Please also check ongoing floating volatility patterns of DRDGOLD and AngloGold Ashanti.

Diversification Opportunities for DRDGOLD and AngloGold Ashanti

0.55

Correlation Coefficient

DRDGOLD  AngloGold Ashanti

Very weak diversification

The 3 months correlation between DRDGOLD and AngloGold is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited and AngloGold Ashanti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti and DRDGOLD 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 DRDGOLD Limited are associated (or correlated) with AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti has no effect on the direction of DRDGOLD i.e., DRDGOLD and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between DRDGOLD and AngloGold Ashanti

Assuming the 90 days trading horizon DRDGOLD Limited is expected to generate 1.05 times more return on investment than AngloGold Ashanti. However, DRDGOLD is 1.05 times more volatile than AngloGold Ashanti. It trades about 0.11 of its potential returns per unit of risk. AngloGold Ashanti is currently generating about -0.02 per unit of risk. If you would invest  151,000  in DRDGOLD Limited on September 13, 2024 and sell it today you would earn a total of  27,000  from holding DRDGOLD Limited or generate 17.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

DRDGOLD Limited  vs.  AngloGold Ashanti

DRDGOLD Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DRDGOLD Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, DRDGOLD exhibited solid returns over the last few months and may actually be approaching a breakup point.

AngloGold Ashanti

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AngloGold Ashanti has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, AngloGold Ashanti is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DRDGOLD and AngloGold Ashanti

The main advantage of trading using opposite DRDGOLD and AngloGold Ashanti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRDGOLD position performs unexpectedly, AngloGold Ashanti 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 AngloGold Ashanti will offset losses from the drop in AngloGold Ashanti's long position.

The idea behind DRDGOLD Limited and AngloGold Ashanti 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.