Correlation Between Harmony Gold and Eastern

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

Diversification Opportunities for Harmony Gold and Eastern

0.08

Correlation Coefficient

Harmony Gold  Eastern

Significant diversification

The 3 months correlation between Harmony and Eastern is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern 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 Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Harmony Gold i.e., Harmony Gold and Eastern go up and down completely randomly.

Pair Corralation between Harmony Gold and Eastern

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.78 times more return on investment than Eastern. However, Harmony Gold is 1.78 times more volatile than Eastern Co. It trades about 0.19 of its potential returns per unit of risk. Eastern Co is currently generating about 0.01 per unit of risk. If you would invest  827.00  in Harmony Gold Mining on December 28, 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 Together
Strength	Insignificant
Accuracy	88.52%
Values	Daily Returns

Harmony Gold Mining  vs.  Eastern Co

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 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Eastern

Risk-Adjusted Performance

Weak

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

Pair Trading with Harmony Gold and Eastern

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

The idea behind Harmony Gold Mining and Eastern Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.