Correlation Between Estee Lauder and Harmony Gold

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

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

Diversification Opportunities for Estee Lauder and Harmony Gold

-0.1

Correlation Coefficient

Estee Lauder  Harmony Gold

Good diversification

The 3 months correlation between Estee and Harmony is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies 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 Estee Lauder 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 Estee Lauder Companies 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 Estee Lauder i.e., Estee Lauder and Harmony Gold go up and down completely randomly.

Pair Corralation between Estee Lauder and Harmony Gold

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Harmony Gold. But the stock apears to be less risky and, when comparing its historical volatility, Estee Lauder Companies is 1.6 times less risky than Harmony Gold. The stock trades about -0.06 of its potential returns per unit of risk. The Harmony Gold Mining is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  450.00  in Harmony Gold Mining on October 4, 2024 and sell it today you would earn a total of  377.00  from holding Harmony Gold Mining or generate 83.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.01%
Values	Daily Returns

Estee Lauder Companies  vs.  Harmony Gold Mining

Estee Lauder Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Estee Lauder Companies 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 essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing 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 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 Estee Lauder and Harmony Gold

The main advantage of trading using opposite Estee Lauder and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder 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 Estee Lauder Companies 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.