Correlation Between DRDGOLD Limited and Galiano Gold

Can any of the company-specific risk be diversified away by investing in both DRDGOLD Limited and Galiano 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 Galiano 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 Galiano Gold, you can compare the effects of market volatilities on DRDGOLD Limited and Galiano 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 Galiano Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of DRDGOLD Limited and Galiano Gold.

Diversification Opportunities for DRDGOLD Limited and Galiano Gold

0.76

Correlation Coefficient

DRDGOLD Limited  Galiano Gold

Poor diversification

The 3 months correlation between DRDGOLD and Galiano is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited ADR and Galiano Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galiano Gold 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 Galiano Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galiano Gold has no effect on the direction of DRDGOLD Limited i.e., DRDGOLD Limited and Galiano Gold go up and down completely randomly.

Pair Corralation between DRDGOLD Limited and Galiano Gold

Considering the 90-day investment horizon DRDGOLD Limited ADR is expected to generate 0.97 times more return on investment than Galiano Gold. However, DRDGOLD Limited ADR is 1.03 times less risky than Galiano Gold. It trades about 0.11 of its potential returns per unit of risk. Galiano Gold is currently generating about 0.0 per unit of risk. If you would invest  782.00  in DRDGOLD Limited ADR on September 4, 2024 and sell it today you would earn a total of  163.00  from holding DRDGOLD Limited ADR or generate 20.84% return on investment over 90 days.

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

DRDGOLD Limited ADR  vs.  Galiano Gold

DRDGOLD Limited ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DRDGOLD Limited ADR are ranked lower than 8 (%) 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.

Galiano Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galiano Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Galiano Gold is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DRDGOLD Limited and Galiano Gold

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

The idea behind DRDGOLD Limited ADR and Galiano Gold 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.