Correlation Between Davis Commodities and Harmony Gold

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

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

Diversification Opportunities for Davis Commodities and Harmony Gold

0.32

Correlation Coefficient

Davis Commodities  Harmony Gold

Weak diversification

The 3 months correlation between Davis and Harmony is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Davis Commodities 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 Davis Commodities 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 Davis Commodities 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 Davis Commodities i.e., Davis Commodities and Harmony Gold go up and down completely randomly.

Pair Corralation between Davis Commodities and Harmony Gold

Given the investment horizon of 90 days Davis Commodities Limited is expected to under-perform the Harmony Gold. In addition to that, Davis Commodities is 2.05 times more volatile than Harmony Gold Mining. It trades about -0.01 of its total potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.08 per unit of volatility. If you would invest  375.00  in Harmony Gold Mining on October 10, 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 Together
Strength	Very Weak
Accuracy	98.78%
Values	Daily Returns

Davis Commodities Limited  vs.  Harmony Gold Mining

Davis Commodities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davis Commodities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Davis Commodities is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

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 weak 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 Davis Commodities and Harmony Gold

The main advantage of trading using opposite Davis Commodities and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Commodities 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 Davis Commodities 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..