Correlation Between Centerra Gold and DRDGOLD Limited

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

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

Diversification Opportunities for Centerra Gold and DRDGOLD Limited

0.62

Correlation Coefficient

Centerra Gold  DRDGOLD Limited

Poor diversification

The 3 months correlation between Centerra and DRDGOLD is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Centerra Gold and DRDGOLD Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRDGOLD Limited ADR and Centerra Gold 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 Centerra Gold are associated (or correlated) with DRDGOLD Limited. 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 ADR has no effect on the direction of Centerra Gold i.e., Centerra Gold and DRDGOLD Limited go up and down completely randomly.

Pair Corralation between Centerra Gold and DRDGOLD Limited

Given the investment horizon of 90 days Centerra Gold is expected to generate 0.76 times more return on investment than DRDGOLD Limited. However, Centerra Gold is 1.31 times less risky than DRDGOLD Limited. It trades about -0.1 of its potential returns per unit of risk. DRDGOLD Limited ADR is currently generating about -0.14 per unit of risk. If you would invest  596.00  in Centerra Gold on September 24, 2024 and sell it today you would lose (27.00) from holding Centerra Gold or give up 4.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Centerra Gold  vs.  DRDGOLD Limited ADR

Centerra Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centerra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

DRDGOLD Limited ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DRDGOLD Limited ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Centerra Gold and DRDGOLD Limited

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

The idea behind Centerra Gold and DRDGOLD Limited ADR 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 CEOs Directory module to screen CEOs from public companies around the world.