Correlation Between Harmony Gold and AP Møller

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

Diversification Opportunities for Harmony Gold and AP Møller

-0.5

Correlation Coefficient

Harmony Gold  AP Møller

Very good diversification

The 3 months correlation between Harmony and DP4B is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller 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 AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of Harmony Gold i.e., Harmony Gold and AP Møller go up and down completely randomly.

Pair Corralation between Harmony Gold and AP Møller

Assuming the 90 days horizon Harmony Gold is expected to generate 7.04 times less return on investment than AP Møller. In addition to that, Harmony Gold is 1.32 times more volatile than AP Mller . It trades about 0.01 of its total potential returns per unit of risk. AP Mller is currently generating about 0.12 per unit of volatility. If you would invest  132,150  in AP Mller on October 9, 2024 and sell it today you would earn a total of  25,000  from holding AP Mller or generate 18.92% 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.  AP Mller

Harmony Gold Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

AP Møller

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AP Møller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and AP Møller

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

The idea behind Harmony Gold Mining and AP Mller 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.