Correlation Between Harmony Gold and Cal-Maine Foods

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

Diversification Opportunities for Harmony Gold and Cal-Maine Foods

-0.27

Correlation Coefficient

Harmony Gold  Cal-Maine Foods

Very good diversification

The 3 months correlation between Harmony and Cal-Maine is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods 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 Cal-Maine Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of Harmony Gold i.e., Harmony Gold and Cal-Maine Foods go up and down completely randomly.

Pair Corralation between Harmony Gold and Cal-Maine Foods

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 0.88 times more return on investment than Cal-Maine Foods. However, Harmony Gold Mining is 1.14 times less risky than Cal-Maine Foods. It trades about 0.23 of its potential returns per unit of risk. Cal Maine Foods is currently generating about -0.03 per unit of risk. If you would invest  780.00  in Harmony Gold Mining on December 28, 2024 and sell it today you would earn a total of  370.00  from holding Harmony Gold Mining or generate 47.44% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Cal Maine Foods

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 18 (%) 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.

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Maine Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cal-Maine Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Harmony Gold and Cal-Maine Foods

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

The idea behind Harmony Gold Mining and Cal Maine Foods 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.