Correlation Between Harmony Gold and Nufarm

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

Diversification Opportunities for Harmony Gold and Nufarm

0.34

Correlation Coefficient

Harmony Gold  Nufarm

Weak diversification

The 3 months correlation between Harmony and Nufarm is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of Harmony Gold i.e., Harmony Gold and Nufarm go up and down completely randomly.

Pair Corralation between Harmony Gold and Nufarm

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.78 times more return on investment than Nufarm. However, Harmony Gold is 1.78 times more volatile than Nufarm Limited. It trades about 0.07 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.05 per unit of risk. If you would invest  341.00  in Harmony Gold Mining on October 11, 2024 and sell it today you would earn a total of  454.00  from holding Harmony Gold Mining or generate 133.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Harmony Gold Mining  vs.  Nufarm Limited

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 unsteady 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.

Nufarm Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nufarm Limited 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.

Pair Trading with Harmony Gold and Nufarm

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

The idea behind Harmony Gold Mining and Nufarm Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.