Correlation Between Harmony Gold and Dairy Farm

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

Diversification Opportunities for Harmony Gold and Dairy Farm

-0.25

Correlation Coefficient

Harmony Gold  Dairy Farm

Very good diversification

The 3 months correlation between Harmony and Dairy is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International 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 Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of Harmony Gold i.e., Harmony Gold and Dairy Farm go up and down completely randomly.

Pair Corralation between Harmony Gold and Dairy Farm

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.33 times more return on investment than Dairy Farm. However, Harmony Gold is 1.33 times more volatile than Dairy Farm International. It trades about 0.07 of its potential returns per unit of risk. Dairy Farm International is currently generating about -0.01 per unit of risk. If you would invest  316.00  in Harmony Gold Mining on October 1, 2024 and sell it today you would earn a total of  454.00  from holding Harmony Gold Mining or generate 143.67% 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.  Dairy Farm International

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Dairy Farm International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dairy Farm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Dairy Farm

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

The idea behind Harmony Gold Mining and Dairy Farm International 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.