Correlation Between Harmony Gold and Blue Label

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

Diversification Opportunities for Harmony Gold and Blue Label

0.7

Correlation Coefficient

Harmony Gold  Blue Label

Poor diversification

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

Pair Corralation between Harmony Gold and Blue Label

Assuming the 90 days trading horizon Harmony Gold Mining is expected to generate 1.56 times more return on investment than Blue Label. However, Harmony Gold is 1.56 times more volatile than Blue Label Telecoms. It trades about 0.29 of its potential returns per unit of risk. Blue Label Telecoms is currently generating about 0.26 per unit of risk. If you would invest  1,523,700  in Harmony Gold Mining on December 30, 2024 and sell it today you would earn a total of  1,062,400  from holding Harmony Gold Mining or generate 69.73% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Blue Label Telecoms

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 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Harmony Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Blue Label Telecoms

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Label Telecoms are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Blue Label exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Blue Label

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

The idea behind Harmony Gold Mining and Blue Label Telecoms 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.