Correlation Between DRDGOLD Limited and Grande Portage

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

Diversification Opportunities for DRDGOLD Limited and Grande Portage

0.72

Correlation Coefficient

DRDGOLD Limited  Grande Portage

Poor diversification

The 3 months correlation between DRDGOLD and Grande is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited ADR and Grande Portage Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grande Portage Resources 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 Grande Portage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grande Portage Resources has no effect on the direction of DRDGOLD Limited i.e., DRDGOLD Limited and Grande Portage go up and down completely randomly.

Pair Corralation between DRDGOLD Limited and Grande Portage

Considering the 90-day investment horizon DRDGOLD Limited is expected to generate 1.33 times less return on investment than Grande Portage. But when comparing it to its historical volatility, DRDGOLD Limited ADR is 2.3 times less risky than Grande Portage. It trades about 0.11 of its potential returns per unit of risk. Grande Portage Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Grande Portage Resources on September 4, 2024 and sell it today you would earn a total of  2.00  from holding Grande Portage Resources or generate 14.29% 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.  Grande Portage Resources

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.

Grande Portage Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grande Portage Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Grande Portage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DRDGOLD Limited and Grande Portage

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

The idea behind DRDGOLD Limited ADR and Grande Portage 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.

Check out your portfolio center.

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.