Correlation Between DRDGOLD Limited and Equinox Gold

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

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

Diversification Opportunities for DRDGOLD Limited and Equinox Gold

-0.04

Correlation Coefficient

DRDGOLD Limited  Equinox Gold

Good diversification

The 3 months correlation between DRDGOLD and Equinox is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited ADR and Equinox Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinox Gold Corp and DRDGOLD Limited 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 ADR are associated (or correlated) with Equinox Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinox Gold Corp has no effect on the direction of DRDGOLD Limited i.e., DRDGOLD Limited and Equinox Gold go up and down completely randomly.

Pair Corralation between DRDGOLD Limited and Equinox Gold

Considering the 90-day investment horizon DRDGOLD Limited ADR is expected to generate 0.99 times more return on investment than Equinox Gold. However, DRDGOLD Limited ADR is 1.01 times less risky than Equinox Gold. It trades about 0.1 of its potential returns per unit of risk. Equinox Gold Corp is currently generating about -0.01 per unit of risk. If you would invest  815.00  in DRDGOLD Limited ADR on September 12, 2024 and sell it today you would earn a total of  151.00  from holding DRDGOLD Limited ADR or generate 18.53% return on investment over 90 days.

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

DRDGOLD Limited ADR  vs.  Equinox Gold Corp

DRDGOLD Limited ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DRDGOLD Limited ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, DRDGOLD Limited exhibited solid returns over the last few months and may actually be approaching a breakup point.

Equinox Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinox Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Equinox Gold is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with DRDGOLD Limited and Equinox Gold

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

The idea behind DRDGOLD Limited ADR and Equinox Gold Corp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.