Correlation Between DRDGOLD Limited and Zijin Mining

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

Diversification Opportunities for DRDGOLD Limited and Zijin Mining

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between DRDGOLD and Zijin is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding DRDGOLD Limited ADR and Zijin Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zijin Mining Group 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 Zijin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zijin Mining Group has no effect on the direction of DRDGOLD Limited i.e., DRDGOLD Limited and Zijin Mining go up and down completely randomly.

Pair Corralation between DRDGOLD Limited and Zijin Mining

Considering the 90-day investment horizon DRDGOLD Limited ADR is expected to under-perform the Zijin Mining. But the stock apears to be less risky and, when comparing its historical volatility, DRDGOLD Limited ADR is 1.27 times less risky than Zijin Mining. The stock trades about -0.22 of its potential returns per unit of risk. The Zijin Mining Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  190.00  in Zijin Mining Group on October 4, 2024 and sell it today you would lose (8.00) from holding Zijin Mining Group or give up 4.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

DRDGOLD Limited ADR  vs.  Zijin Mining Group

 Performance 
       Timeline  
DRDGOLD Limited ADR 

Risk-Adjusted Performance

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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.
Zijin Mining Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Zijin Mining Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

DRDGOLD Limited and Zijin Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DRDGOLD Limited and Zijin Mining

The main advantage of trading using opposite DRDGOLD Limited and Zijin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRDGOLD Limited position performs unexpectedly, Zijin 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 Zijin Mining will offset losses from the drop in Zijin Mining's long position.
The idea behind DRDGOLD Limited ADR and Zijin Mining Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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