Correlation Between Central Puerto and Harmony Gold

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

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

Diversification Opportunities for Central Puerto and Harmony Gold

-0.57

Correlation Coefficient

Central Puerto  Harmony Gold

Excellent diversification

The 3 months correlation between Central and Harmony is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA 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 Central Puerto 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 Central Puerto SA 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 Central Puerto i.e., Central Puerto and Harmony Gold go up and down completely randomly.

Pair Corralation between Central Puerto and Harmony Gold

Assuming the 90 days trading horizon Central Puerto SA is expected to under-perform the Harmony Gold. In addition to that, Central Puerto is 1.05 times more volatile than Harmony Gold Mining. It trades about -0.06 of its total potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.33 per unit of volatility. If you would invest  965,000  in Harmony Gold Mining on December 30, 2024 and sell it today you would earn a total of  872,500  from holding Harmony Gold Mining or generate 90.41% return on investment over 90 days.

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

Central Puerto SA  vs.  Harmony Gold Mining

Central Puerto SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Puerto SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Harmony Gold Mining

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harmony Gold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Puerto and Harmony Gold

The main advantage of trading using opposite Central Puerto and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Puerto 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 Central Puerto SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.