Correlation Between Harmony Gold and Albemarle

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

Diversification Opportunities for Harmony Gold and Albemarle

0.28

Correlation Coefficient

Harmony Gold  Albemarle

Modest diversification

The 3 months correlation between Harmony and Albemarle is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Harmony Gold i.e., Harmony Gold and Albemarle go up and down completely randomly.

Pair Corralation between Harmony Gold and Albemarle

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the Albemarle. In addition to that, Harmony Gold is 1.49 times more volatile than Albemarle. It trades about -0.09 of its total potential returns per unit of risk. Albemarle is currently generating about 0.03 per unit of volatility. If you would invest  4,471  in Albemarle on October 22, 2024 and sell it today you would earn a total of  91.00  from holding Albemarle or generate 2.04% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Albemarle

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. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Albemarle

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Albemarle are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Albemarle is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Harmony Gold and Albemarle

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

The idea behind Harmony Gold Mining and Albemarle 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.