Correlation Between GMS and Harmony Gold

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

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

Diversification Opportunities for GMS and Harmony Gold

-0.57

Correlation Coefficient

GMS  Harmony Gold

Excellent diversification

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

Pair Corralation between GMS and Harmony Gold

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Harmony Gold. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.68 times less risky than Harmony Gold. The stock trades about -0.11 of its potential returns per unit of risk. The Harmony Gold Mining is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  831.00  in Harmony Gold Mining on December 26, 2024 and sell it today you would earn a total of  425.00  from holding Harmony Gold Mining or generate 51.14% return on investment over 90 days.

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

GMS Inc  vs.  Harmony Gold Mining

GMS Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Harmony Gold Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Harmony Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Harmony Gold

The main advantage of trading using opposite GMS and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS 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 GMS 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.