Correlation Between Harmony Gold and State Street

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

Diversification Opportunities for Harmony Gold and State Street

-0.41

Correlation Coefficient

Harmony Gold  State Street

Very good diversification

The 3 months correlation between Harmony and State is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of Harmony Gold i.e., Harmony Gold and State Street go up and down completely randomly.

Pair Corralation between Harmony Gold and State Street

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the State Street. In addition to that, Harmony Gold is 2.46 times more volatile than State Street. It trades about -0.04 of its total potential returns per unit of risk. State Street is currently generating about 0.25 per unit of volatility. If you would invest  7,718  in State Street on October 4, 2024 and sell it today you would earn a total of  1,674  from holding State Street or generate 21.69% 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.  State Street

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.

State Street

Risk-Adjusted Performance

19 of 100

Solid

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

Pair Trading with Harmony Gold and State Street

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

The idea behind Harmony Gold Mining and State Street 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.