Correlation Between COSTCO WHOLESALE and Harmony Gold

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

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

Diversification Opportunities for COSTCO WHOLESALE and Harmony Gold

-0.61

Correlation Coefficient

COSTCO WHOLESALE  Harmony Gold

Excellent diversification

The 3 months correlation between COSTCO and Harmony is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE i.e., COSTCO WHOLESALE and Harmony Gold go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and Harmony Gold

Assuming the 90 days trading horizon COSTCO WHOLESALE CDR is expected to generate 0.54 times more return on investment than Harmony Gold. However, COSTCO WHOLESALE CDR is 1.85 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 per unit of risk. If you would invest  2,754  in COSTCO WHOLESALE CDR on October 22, 2024 and sell it today you would earn a total of  86.00  from holding COSTCO WHOLESALE CDR or generate 3.12% return on investment over 90 days.

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

COSTCO WHOLESALE CDR  vs.  Harmony Gold Mining

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, COSTCO WHOLESALE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 basic 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 COSTCO WHOLESALE and Harmony Gold

The main advantage of trading using opposite COSTCO WHOLESALE and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.