Correlation Between Select Energy and DRDGOLD Limited
Can any of the company-specific risk be diversified away by investing in both Select Energy 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 Select Energy and DRDGOLD Limited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Energy Services and DRDGOLD Limited ADR, you can compare the effects of market volatilities on Select Energy 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 Select Energy with a short position of DRDGOLD Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Energy and DRDGOLD Limited.
Diversification Opportunities for Select Energy and DRDGOLD Limited
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Select and DRDGOLD is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Select Energy Services 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 Select Energy 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 Select Energy Services 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 Select Energy i.e., Select Energy and DRDGOLD Limited go up and down completely randomly.
Pair Corralation between Select Energy and DRDGOLD Limited
Given the investment horizon of 90 days Select Energy Services is expected to generate 0.51 times more return on investment than DRDGOLD Limited. However, Select Energy Services is 1.95 times less risky than DRDGOLD Limited. It trades about 0.22 of its potential returns per unit of risk. DRDGOLD Limited ADR is currently generating about 0.0 per unit of risk. If you would invest 843.00 in Select Energy Services on March 18, 2025 and sell it today you would earn a total of 74.00 from holding Select Energy Services or generate 8.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Energy Services vs. DRDGOLD Limited ADR
Performance |
| Timeline |
| Select Energy Services |
| DRDGOLD Limited ADR |
Select Energy and DRDGOLD Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Energy and DRDGOLD Limited
The main advantage of trading using opposite Select Energy and DRDGOLD Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Energy 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.| Select Energy vs. Orion Engineered Carbons | Select Energy vs. Element Solutions | Select Energy vs. Kronos Worldwide | Select Energy vs. FutureFuel Corp |
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Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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