Correlation Between Harmony Gold and RCL Foods

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

Diversification Opportunities for Harmony Gold and RCL Foods

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Harmony and RCL is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and RCL Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCL Foods 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 RCL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCL Foods has no effect on the direction of Harmony Gold i.e., Harmony Gold and RCL Foods go up and down completely randomly.

Pair Corralation between Harmony Gold and RCL Foods

Assuming the 90 days trading horizon Harmony Gold Mining is expected to generate 1.14 times more return on investment than RCL Foods. However, Harmony Gold is 1.14 times more volatile than RCL Foods. It trades about 0.24 of its potential returns per unit of risk. RCL Foods is currently generating about 0.02 per unit of risk. If you would invest  1,563,900  in Harmony Gold Mining on December 27, 2024 and sell it today you would earn a total of  753,200  from holding Harmony Gold Mining or generate 48.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Harmony Gold Mining  vs.  RCL Foods

 Performance 
       Timeline  
Harmony Gold Mining 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 18 (%) 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.
RCL Foods 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in RCL Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, RCL Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Harmony Gold and RCL Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Harmony Gold and RCL Foods

The main advantage of trading using opposite Harmony Gold and RCL Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, RCL Foods 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 RCL Foods will offset losses from the drop in RCL Foods' long position.
The idea behind Harmony Gold Mining and RCL Foods 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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