Correlation Between Ecolab and Harmony Gold

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

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

Diversification Opportunities for Ecolab and Harmony Gold

0.58

Correlation Coefficient

Ecolab  Harmony Gold

Very weak diversification

The 3 months correlation between Ecolab and Harmony is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc 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 Ecolab 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 Ecolab Inc 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 Ecolab i.e., Ecolab and Harmony Gold go up and down completely randomly.

Pair Corralation between Ecolab and Harmony Gold

Considering the 90-day investment horizon Ecolab Inc is expected to generate 0.26 times more return on investment than Harmony Gold. However, Ecolab Inc is 3.91 times less risky than Harmony Gold. It trades about -0.17 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.07 per unit of risk. If you would invest  25,577  in Ecolab Inc on October 14, 2024 and sell it today you would lose (2,605) from holding Ecolab Inc or give up 10.18% of portfolio value over 90 days.

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

Ecolab Inc  vs.  Harmony Gold Mining

Ecolab Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company 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 Ecolab and Harmony Gold

The main advantage of trading using opposite Ecolab and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab 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 Ecolab Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.