Correlation Between DRDGOLD Limited and Harmony Gold

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

Diversification Opportunities for DRDGOLD Limited and Harmony Gold

0.89

Correlation Coefficient

DRDGOLD Limited  Harmony Gold

Very poor diversification

The 3 months correlation between DRDGOLD and Harmony is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited ADR and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold 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 Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of DRDGOLD Limited i.e., DRDGOLD Limited and Harmony Gold go up and down completely randomly.

Pair Corralation between DRDGOLD Limited and Harmony Gold

Considering the 90-day investment horizon DRDGOLD Limited ADR is expected to generate 1.06 times more return on investment than Harmony Gold. However, DRDGOLD Limited is 1.06 times more volatile than Harmony Gold Mining. It trades about -0.14 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.15 per unit of risk. If you would invest  959.00  in DRDGOLD Limited ADR on September 24, 2024 and sell it today you would lose (80.00) from holding DRDGOLD Limited ADR or give up 8.34% of portfolio value over 90 days.

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

DRDGOLD Limited ADR  vs.  Harmony Gold Mining

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.

Harmony Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmony Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with DRDGOLD Limited and Harmony Gold

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

The idea behind DRDGOLD Limited ADR and Harmony Gold 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 Global Correlations module to find global opportunities by holding instruments from different markets.