Correlation Between DRDGOLD and Pan African

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

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

Diversification Opportunities for DRDGOLD and Pan African

0.88

Correlation Coefficient

DRDGOLD  Pan African

Very poor diversification

The 3 months correlation between DRDGOLD and Pan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited and Pan African Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan African Resources 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 Pan African. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan African Resources has no effect on the direction of DRDGOLD i.e., DRDGOLD and Pan African go up and down completely randomly.

Pair Corralation between DRDGOLD and Pan African

Assuming the 90 days trading horizon DRDGOLD Limited is expected to generate 1.11 times more return on investment than Pan African. However, DRDGOLD is 1.11 times more volatile than Pan African Resources. It trades about 0.11 of its potential returns per unit of risk. Pan African Resources is currently generating about 0.09 per unit of risk. If you would invest  149,500  in DRDGOLD Limited on September 1, 2024 and sell it today you would earn a total of  27,500  from holding DRDGOLD Limited or generate 18.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

DRDGOLD Limited  vs.  Pan African Resources

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.

Pan African Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pan African Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Pan African exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DRDGOLD and Pan African

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

The idea behind DRDGOLD Limited and Pan African Resources 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.