Correlation Between Harmony Gold and Hongli Group

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

Diversification Opportunities for Harmony Gold and Hongli Group

-0.57

Correlation Coefficient

Harmony Gold  Hongli Group

Excellent diversification

The 3 months correlation between Harmony and Hongli is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Hongli Group Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongli Group Ordinary 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 Hongli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongli Group Ordinary has no effect on the direction of Harmony Gold i.e., Harmony Gold and Hongli Group go up and down completely randomly.

Pair Corralation between Harmony Gold and Hongli Group

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the Hongli Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 1.25 times less risky than Hongli Group. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Hongli Group Ordinary is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Hongli Group Ordinary on October 24, 2024 and sell it today you would earn a total of  13.00  from holding Hongli Group Ordinary or generate 11.11% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Hongli Group Ordinary

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 unfluctuating 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.

Hongli Group Ordinary

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hongli Group Ordinary are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain essential indicators, Hongli Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Hongli Group

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

The idea behind Harmony Gold Mining and Hongli Group Ordinary 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.