Correlation Between Harmony Gold and Insteel Industries

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

Diversification Opportunities for Harmony Gold and Insteel Industries

-0.43

Correlation Coefficient

Harmony Gold  Insteel Industries

Very good diversification

The 3 months correlation between Harmony and Insteel is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries 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 Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of Harmony Gold i.e., Harmony Gold and Insteel Industries go up and down completely randomly.

Pair Corralation between Harmony Gold and Insteel Industries

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.62 times more return on investment than Insteel Industries. However, Harmony Gold is 1.62 times more volatile than Insteel Industries. It trades about -0.02 of its potential returns per unit of risk. Insteel Industries is currently generating about -0.05 per unit of risk. If you would invest  1,033  in Harmony Gold Mining on September 14, 2024 and sell it today you would lose (83.00) from holding Harmony Gold Mining or give up 8.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Harmony Gold Mining  vs.  Insteel Industries

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 nearly stable fundamental indicators, Harmony Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Insteel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insteel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Harmony Gold and Insteel Industries

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

The idea behind Harmony Gold Mining and Insteel Industries 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.