Correlation Between SSR Mining and DRDGOLD Limited

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

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

Diversification Opportunities for SSR Mining and DRDGOLD Limited

0.9

Correlation Coefficient

SSR Mining  DRDGOLD Limited

Almost no diversification

The 3 months correlation between SSR and DRDGOLD is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SSR Mining 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 SSR Mining 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 SSR Mining 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 SSR Mining i.e., SSR Mining and DRDGOLD Limited go up and down completely randomly.

Pair Corralation between SSR Mining and DRDGOLD Limited

Given the investment horizon of 90 days SSR Mining is expected to generate 1.12 times less return on investment than DRDGOLD Limited. But when comparing it to its historical volatility, SSR Mining is 1.07 times less risky than DRDGOLD Limited. It trades about 0.25 of its potential returns per unit of risk. DRDGOLD Limited ADR is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  862.00  in DRDGOLD Limited ADR on December 27, 2024 and sell it today you would earn a total of  582.00  from holding DRDGOLD Limited ADR or generate 67.52% return on investment over 90 days.

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

SSR Mining  vs.  DRDGOLD Limited ADR

SSR Mining

Risk-Adjusted Performance

Solid

Over the last 90 days SSR Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, SSR Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

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 20 (%) 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.

Pair Trading with SSR Mining and DRDGOLD Limited

The main advantage of trading using opposite SSR Mining and DRDGOLD Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSR Mining 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 SSR Mining 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.