Correlation Between Gold Fields and DRDGOLD

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

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

Diversification Opportunities for Gold Fields and DRDGOLD

0.91

Correlation Coefficient

Gold Fields  DRDGOLD

Almost no diversification

The 3 months correlation between Gold and DRDGOLD is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields and DRDGOLD Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRDGOLD Limited and Gold Fields 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 Gold Fields are associated (or correlated) with DRDGOLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRDGOLD Limited has no effect on the direction of Gold Fields i.e., Gold Fields and DRDGOLD go up and down completely randomly.

Pair Corralation between Gold Fields and DRDGOLD

Assuming the 90 days trading horizon Gold Fields is expected to generate 2.61 times less return on investment than DRDGOLD. But when comparing it to its historical volatility, Gold Fields is 1.04 times less risky than DRDGOLD. It trades about 0.04 of its potential returns per unit of risk. DRDGOLD Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Gold Fields  vs.  DRDGOLD Limited

Gold Fields

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Fields are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Gold Fields may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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.

Pair Trading with Gold Fields and DRDGOLD

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

The idea behind Gold Fields and DRDGOLD Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.