Correlation Between Harmony Gold and DRDGOLD

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

Diversification Opportunities for Harmony Gold and DRDGOLD

0.93

Correlation Coefficient

Harmony Gold  DRDGOLD

Almost no diversification

The 3 months correlation between Harmony and DRDGOLD is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and DRDGOLD Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRDGOLD Limited 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 DRDGOLD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRDGOLD Limited has no effect on the direction of Harmony Gold i.e., Harmony Gold and DRDGOLD go up and down completely randomly.

Pair Corralation between Harmony Gold and DRDGOLD

Assuming the 90 days trading horizon Harmony Gold Mining is expected to generate 0.84 times more return on investment than DRDGOLD. However, Harmony Gold Mining is 1.19 times less risky than DRDGOLD. It trades about 0.36 of its potential returns per unit of risk. DRDGOLD Limited is currently generating about 0.1 per unit of risk. If you would invest  1,558,700  in Harmony Gold Mining on October 20, 2024 and sell it today you would earn a total of  284,300  from holding Harmony Gold Mining or generate 18.24% return on investment over 90 days.

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

Harmony Gold Mining  vs.  DRDGOLD Limited

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. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

DRDGOLD Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DRDGOLD Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Harmony Gold and DRDGOLD

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

The idea behind Harmony Gold Mining and DRDGOLD Limited 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.