Correlation Between BW Offshore and Harmony Gold

Can any of the company-specific risk be diversified away by investing in both BW Offshore and Harmony 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 BW Offshore and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for BW Offshore and Harmony Gold

-0.16

Correlation Coefficient

BW Offshore  Harmony Gold

Good diversification

The 3 months correlation between BWOFY and Harmony is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore Limited and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining and BW Offshore 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 BW Offshore Limited are associated (or correlated) with Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of BW Offshore i.e., BW Offshore and Harmony Gold go up and down completely randomly.

Pair Corralation between BW Offshore and Harmony Gold

Assuming the 90 days horizon BW Offshore is expected to generate 5.58 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, BW Offshore Limited is 2.78 times less risky than Harmony Gold. It trades about 0.04 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  375.00  in Harmony Gold Mining on October 4, 2024 and sell it today you would earn a total of  452.00  from holding Harmony Gold Mining or generate 120.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.8%
Values	Daily Returns

BW Offshore Limited  vs.  Harmony Gold Mining

BW Offshore Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, BW Offshore may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Harmony Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmony Gold Mining 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 fundamental 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.

Pair Trading with BW Offshore and Harmony Gold

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

The idea behind BW Offshore Limited and Harmony Gold Mining 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.