Correlation Between DRDGOLD Limited and Evolution Mining

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

Diversification Opportunities for DRDGOLD Limited and Evolution Mining

0.86

Correlation Coefficient

DRDGOLD Limited  Evolution Mining

Very poor diversification

The 3 months correlation between DRDGOLD and Evolution is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited ADR and Evolution Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution Mining 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 Evolution Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution Mining has no effect on the direction of DRDGOLD Limited i.e., DRDGOLD Limited and Evolution Mining go up and down completely randomly.

Pair Corralation between DRDGOLD Limited and Evolution Mining

Considering the 90-day investment horizon DRDGOLD Limited ADR is expected to generate 0.87 times more return on investment than Evolution Mining. However, DRDGOLD Limited ADR is 1.15 times less risky than Evolution Mining. It trades about 0.25 of its potential returns per unit of risk. Evolution Mining is currently generating about 0.19 per unit of risk. If you would invest  871.00  in DRDGOLD Limited ADR on December 21, 2024 and sell it today you would earn a total of  550.00  from holding DRDGOLD Limited ADR or generate 63.15% return on investment over 90 days.

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

DRDGOLD Limited ADR  vs.  Evolution Mining

DRDGOLD Limited ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DRDGOLD Limited ADR are ranked lower than 19 (%) 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.

Evolution Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Evolution Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DRDGOLD Limited and Evolution Mining

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

The idea behind DRDGOLD Limited ADR and Evolution Mining 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.