Correlation Between Harmony Gold and Northern Star

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

Diversification Opportunities for Harmony Gold and Northern Star

0.75

Correlation Coefficient

Harmony Gold  Northern Star

Poor diversification

The 3 months correlation between Harmony and Northern is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Northern Star Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Star Resources 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 Northern Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Star Resources has no effect on the direction of Harmony Gold i.e., Harmony Gold and Northern Star go up and down completely randomly.

Pair Corralation between Harmony Gold and Northern Star

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.71 times more return on investment than Northern Star. However, Harmony Gold is 1.71 times more volatile than Northern Star Resources. It trades about 0.41 of its potential returns per unit of risk. Northern Star Resources is currently generating about 0.43 per unit of risk. If you would invest  780.00  in Harmony Gold Mining on October 23, 2024 and sell it today you would earn a total of  155.00  from holding Harmony Gold Mining or generate 19.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

Harmony Gold Mining  vs.  Northern Star Resources

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Northern Star Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern Star Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Northern Star 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 Northern Star

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

The idea behind Harmony Gold Mining and Northern Star Resources 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 CEOs Directory module to screen CEOs from public companies around the world.