Correlation Between Harmony Gold and Peabody Energy

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

Diversification Opportunities for Harmony Gold and Peabody Energy

-0.57

Correlation Coefficient

Harmony Gold  Peabody Energy

Excellent diversification

The 3 months correlation between Harmony and Peabody is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Peabody Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peabody Energy 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 Peabody Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peabody Energy has no effect on the direction of Harmony Gold i.e., Harmony Gold and Peabody Energy go up and down completely randomly.

Pair Corralation between Harmony Gold and Peabody Energy

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 0.87 times more return on investment than Peabody Energy. However, Harmony Gold Mining is 1.15 times less risky than Peabody Energy. It trades about 0.25 of its potential returns per unit of risk. Peabody Energy is currently generating about -0.15 per unit of risk. If you would invest  780.00  in Harmony Gold Mining on December 29, 2024 and sell it today you would earn a total of  430.00  from holding Harmony Gold Mining or generate 55.13% 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.  Peabody Energy

Harmony Gold Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Peabody Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Peabody Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Harmony Gold and Peabody Energy

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

The idea behind Harmony Gold Mining and Peabody Energy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.