Correlation Between DRDGOLD and Deneb Investments

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

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

Diversification Opportunities for DRDGOLD and Deneb Investments

0.29

Correlation Coefficient

DRDGOLD  Deneb Investments

Modest diversification

The 3 months correlation between DRDGOLD and Deneb is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited and Deneb Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deneb Investments 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 Deneb Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deneb Investments has no effect on the direction of DRDGOLD i.e., DRDGOLD and Deneb Investments go up and down completely randomly.

Pair Corralation between DRDGOLD and Deneb Investments

Assuming the 90 days trading horizon DRDGOLD is expected to generate 33.11 times less return on investment than Deneb Investments. But when comparing it to its historical volatility, DRDGOLD Limited is 23.94 times less risky than Deneb Investments. It trades about 0.04 of its potential returns per unit of risk. Deneb Investments is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  22,169  in Deneb Investments on September 14, 2024 and sell it today you would lose (569.00) from holding Deneb Investments or give up 2.57% of portfolio value over 90 days.

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

DRDGOLD Limited  vs.  Deneb Investments

DRDGOLD Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DRDGOLD Limited are ranked lower than 7 (%) 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.

Deneb Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deneb Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Deneb Investments 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 Deneb Investments

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

The idea behind DRDGOLD Limited and Deneb Investments 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.