Correlation Between Harmony Gold and Alaska Air

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

Diversification Opportunities for Harmony Gold and Alaska Air

-0.61

Correlation Coefficient

Harmony Gold  Alaska Air

Excellent diversification

The 3 months correlation between Harmony and Alaska is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Alaska Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group 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 Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group has no effect on the direction of Harmony Gold i.e., Harmony Gold and Alaska Air go up and down completely randomly.

Pair Corralation between Harmony Gold and Alaska Air

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.77 times more return on investment than Alaska Air. However, Harmony Gold is 1.77 times more volatile than Alaska Air Group. It trades about 0.08 of its potential returns per unit of risk. Alaska Air Group is currently generating about 0.04 per unit of risk. If you would invest  375.00  in Harmony Gold Mining on October 10, 2024 and sell it today you would earn a total of  452.00  from holding Harmony Gold Mining or generate 120.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	65.32%
Values	Daily Returns

Harmony Gold Mining  vs.  Alaska Air Group

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 weak 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.

Alaska Air Group

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Alaska Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Alaska Air

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

The idea behind Harmony Gold Mining and Alaska Air Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.