Correlation Between Harmony Gold and Synchrony Financial

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

Diversification Opportunities for Harmony Gold and Synchrony Financial

-0.7

Correlation Coefficient

Harmony Gold  Synchrony Financial

Excellent diversification

The 3 months correlation between Harmony and Synchrony is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Synchrony Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Financial 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 Synchrony Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synchrony Financial has no effect on the direction of Harmony Gold i.e., Harmony Gold and Synchrony Financial go up and down completely randomly.

Pair Corralation between Harmony Gold and Synchrony Financial

Assuming the 90 days horizon Harmony Gold is expected to generate 46.95 times less return on investment than Synchrony Financial. In addition to that, Harmony Gold is 1.29 times more volatile than Synchrony Financial. It trades about 0.0 of its total potential returns per unit of risk. Synchrony Financial is currently generating about 0.2 per unit of volatility. If you would invest  5,220  in Synchrony Financial on October 26, 2024 and sell it today you would earn a total of  1,523  from holding Synchrony Financial or generate 29.18% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Synchrony Financial

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 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.

Synchrony Financial

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synchrony Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Synchrony Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Synchrony Financial

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

The idea behind Harmony Gold Mining and Synchrony Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.