Correlation Between Wheaton Precious and DRDGOLD Limited

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

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

Diversification Opportunities for Wheaton Precious and DRDGOLD Limited

0.74

Correlation Coefficient

Wheaton Precious  DRDGOLD Limited

Poor diversification

The 3 months correlation between Wheaton and DRDGOLD is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Wheaton Precious Metals 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 Wheaton Precious 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 Wheaton Precious Metals 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 Wheaton Precious i.e., Wheaton Precious and DRDGOLD Limited go up and down completely randomly.

Pair Corralation between Wheaton Precious and DRDGOLD Limited

Considering the 90-day investment horizon Wheaton Precious Metals is expected to generate 0.45 times more return on investment than DRDGOLD Limited. However, Wheaton Precious Metals is 2.21 times less risky than DRDGOLD Limited. It trades about 0.23 of its potential returns per unit of risk. DRDGOLD Limited ADR is currently generating about 0.06 per unit of risk. If you would invest  5,122  in Wheaton Precious Metals on February 14, 2024 and sell it today you would earn a total of  384.00  from holding Wheaton Precious Metals or generate 7.5% return on investment over 90 days.

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

Wheaton Precious Metals  vs.  DRDGOLD Limited ADR

Wheaton Precious Metals

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wheaton Precious Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Wheaton Precious displayed solid returns over the last few months and may actually be approaching a breakup point.

DRDGOLD Limited ADR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DRDGOLD Limited ADR are ranked lower than 11 (%) 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 Wheaton Precious and DRDGOLD Limited

The main advantage of trading using opposite Wheaton Precious and DRDGOLD Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wheaton Precious 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 Wheaton Precious Metals 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 Transaction History module to view history of all your transactions and understand their impact on performance.