Correlation Between Harmony Gold and AVITA Medical

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

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

Diversification Opportunities for Harmony Gold and AVITA Medical

-0.57

Correlation Coefficient

Harmony Gold  AVITA Medical

Excellent diversification

The 3 months correlation between Harmony and AVITA is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA Medical and Harmony Gold 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 Harmony Gold Mining are associated (or correlated) with AVITA Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVITA Medical has no effect on the direction of Harmony Gold i.e., Harmony Gold and AVITA Medical go up and down completely randomly.

Pair Corralation between Harmony Gold and AVITA Medical

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the AVITA Medical. But the stock apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 1.34 times less risky than AVITA Medical. The stock trades about -0.09 of its potential returns per unit of risk. The AVITA Medical is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  216.00  in AVITA Medical on October 7, 2024 and sell it today you would earn a total of  32.00  from holding AVITA Medical or generate 14.81% return on investment over 90 days.

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

Harmony Gold Mining  vs.  AVITA Medical

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 nearly stable basic indicators, Harmony Gold is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

AVITA Medical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVITA Medical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, AVITA Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and AVITA Medical

The main advantage of trading using opposite Harmony Gold and AVITA Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, AVITA Medical 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 AVITA Medical will offset losses from the drop in AVITA Medical's long position.

The idea behind Harmony Gold Mining and AVITA Medical 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.