Correlation Between Harmony Gold and EMedia Holdings

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

Diversification Opportunities for Harmony Gold and EMedia Holdings

-0.26

Correlation Coefficient

Harmony Gold  EMedia Holdings

Very good diversification

The 3 months correlation between Harmony and EMedia is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and eMedia Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eMedia Holdings 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 EMedia Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eMedia Holdings has no effect on the direction of Harmony Gold i.e., Harmony Gold and EMedia Holdings go up and down completely randomly.

Pair Corralation between Harmony Gold and EMedia Holdings

Assuming the 90 days trading horizon Harmony Gold Mining is expected to under-perform the EMedia Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 1.81 times less risky than EMedia Holdings. The stock trades about -0.15 of its potential returns per unit of risk. The eMedia Holdings Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  33,000  in eMedia Holdings Limited on September 29, 2024 and sell it today you would earn a total of  3,000  from holding eMedia Holdings Limited or generate 9.09% return on investment over 90 days.

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

Harmony Gold Mining  vs.  eMedia Holdings 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.

eMedia Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eMedia Holdings Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, EMedia Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and EMedia Holdings

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

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