Correlation Between Harmony Gold and Davis Commodities

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

Diversification Opportunities for Harmony Gold and Davis Commodities

-0.62

Correlation Coefficient

Harmony Gold  Davis Commodities

Excellent diversification

The 3 months correlation between Harmony and Davis is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Davis Commodities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Commodities 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 Davis Commodities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Commodities has no effect on the direction of Harmony Gold i.e., Harmony Gold and Davis Commodities go up and down completely randomly.

Pair Corralation between Harmony Gold and Davis Commodities

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.23 times more return on investment than Davis Commodities. However, Harmony Gold is 1.23 times more volatile than Davis Commodities Limited. It trades about 0.2 of its potential returns per unit of risk. Davis Commodities Limited is currently generating about -0.01 per unit of risk. If you would invest  827.00  in Harmony Gold Mining on December 20, 2024 and sell it today you would earn a total of  373.00  from holding Harmony Gold Mining or generate 45.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	80.0%
Values	Daily Returns

Harmony Gold Mining  vs.  Davis Commodities Limited

Harmony Gold Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Davis Commodities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davis Commodities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Davis Commodities is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Harmony Gold and Davis Commodities

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

The idea behind Harmony Gold Mining and Davis Commodities 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.