Correlation Between Harmony Gold and Sasol

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

Diversification Opportunities for Harmony Gold and Sasol

0.85

Correlation Coefficient

Harmony Gold  Sasol

Very poor diversification

The 3 months correlation between Harmony and Sasol is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Sasol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sasol 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 Sasol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sasol has no effect on the direction of Harmony Gold i.e., Harmony Gold and Sasol go up and down completely randomly.

Pair Corralation between Harmony Gold and Sasol

Assuming the 90 days trading horizon Harmony Gold Mining is expected to under-perform the Sasol. But the stock apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 1.24 times less risky than Sasol. The stock trades about -0.05 of its potential returns per unit of risk. The Sasol is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,039,200  in Sasol on October 23, 2024 and sell it today you would lose (59,200) from holding Sasol or give up 5.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Harmony Gold Mining  vs.  Sasol

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.

Sasol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sasol has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Sasol is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Harmony Gold and Sasol

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

The idea behind Harmony Gold Mining and Sasol 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.