Correlation Between DRDGOLD Limited and Torex Gold

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

Diversification Opportunities for DRDGOLD Limited and Torex Gold

0.83

Correlation Coefficient

DRDGOLD Limited  Torex Gold

Very poor diversification

The 3 months correlation between DRDGOLD and Torex is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited ADR and Torex Gold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torex Gold 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 Torex Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torex Gold Resources has no effect on the direction of DRDGOLD Limited i.e., DRDGOLD Limited and Torex Gold go up and down completely randomly.

Pair Corralation between DRDGOLD Limited and Torex Gold

Considering the 90-day investment horizon DRDGOLD Limited is expected to generate 3.59 times less return on investment than Torex Gold. In addition to that, DRDGOLD Limited is 1.09 times more volatile than Torex Gold Resources. It trades about 0.02 of its total potential returns per unit of risk. Torex Gold Resources is currently generating about 0.09 per unit of volatility. If you would invest  1,909  in Torex Gold Resources on August 31, 2024 and sell it today you would earn a total of  186.00  from holding Torex Gold Resources or generate 9.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.78%
Values	Daily Returns

DRDGOLD Limited ADR  vs.  Torex Gold 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.

Torex Gold Resources

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Torex Gold Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Torex Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DRDGOLD Limited and Torex Gold

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

The idea behind DRDGOLD Limited ADR and Torex Gold 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.