Correlation Between Harmony Gold and ABB

Can any of the company-specific risk be diversified away by investing in both Harmony Gold and ABB 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 ABB 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 ABB, you can compare the effects of market volatilities on Harmony Gold and ABB 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 ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and ABB.

Diversification Opportunities for Harmony Gold and ABB

0.23

Correlation Coefficient

Harmony Gold  ABB

Modest diversification

The 3 months correlation between Harmony and ABB is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB 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 ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Harmony Gold i.e., Harmony Gold and ABB go up and down completely randomly.

Pair Corralation between Harmony Gold and ABB

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the ABB. In addition to that, Harmony Gold is 1.28 times more volatile than ABB. It trades about -0.15 of its total potential returns per unit of risk. ABB is currently generating about 0.18 per unit of volatility. If you would invest  4,960  in ABB on September 5, 2024 and sell it today you would earn a total of  490.00  from holding ABB or generate 9.88% return on investment over 90 days.

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

Harmony Gold Mining  vs.  ABB

Harmony Gold Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

ABB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, ABB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Harmony Gold and ABB

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

The idea behind Harmony Gold Mining and ABB 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.