Correlation Between Harmony Gold and Occidental Petroleum

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

Diversification Opportunities for Harmony Gold and Occidental Petroleum

-0.15

Correlation Coefficient

Harmony Gold  Occidental Petroleum

Good diversification

The 3 months correlation between Harmony and Occidental is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Harmony Gold i.e., Harmony Gold and Occidental Petroleum go up and down completely randomly.

Pair Corralation between Harmony Gold and Occidental Petroleum

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the Occidental Petroleum. In addition to that, Harmony Gold is 1.34 times more volatile than Occidental Petroleum. It trades about -0.38 of its total potential returns per unit of risk. Occidental Petroleum is currently generating about 0.06 per unit of volatility. If you would invest  4,509  in Occidental Petroleum on December 4, 2024 and sell it today you would earn a total of  108.00  from holding Occidental Petroleum or generate 2.4% 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.  Occidental Petroleum

Harmony Gold Mining

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Harmony Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Occidental Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Occidental Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Occidental Petroleum is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Harmony Gold and Occidental Petroleum

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

The idea behind Harmony Gold Mining and Occidental Petroleum 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.