Correlation Between Harmony Gold and AXA SA

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

Diversification Opportunities for Harmony Gold and AXA SA

0.39

Correlation Coefficient

Harmony Gold  AXA SA

Weak diversification

The 3 months correlation between Harmony and AXA is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA 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 AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of Harmony Gold i.e., Harmony Gold and AXA SA go up and down completely randomly.

Pair Corralation between Harmony Gold and AXA SA

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the AXA SA. In addition to that, Harmony Gold is 2.82 times more volatile than AXA SA. It trades about -0.12 of its total potential returns per unit of risk. AXA SA is currently generating about 0.1 per unit of volatility. If you would invest  3,414  in AXA SA on October 10, 2024 and sell it today you would earn a total of  58.00  from holding AXA SA or generate 1.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Harmony Gold Mining  vs.  AXA SA

Harmony Gold Mining

Risk-Adjusted Performance

0 of 100

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

AXA SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AXA SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AXA SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Harmony Gold and AXA SA

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

The idea behind Harmony Gold Mining and AXA SA 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.