Correlation Between Harmony Gold and Sea

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

Diversification Opportunities for Harmony Gold and Sea

0.7

Correlation Coefficient

Harmony Gold  Sea

Poor diversification

The 3 months correlation between Harmony and Sea is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Harmony Gold i.e., Harmony Gold and Sea go up and down completely randomly.

Pair Corralation between Harmony Gold and Sea

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.5 times more return on investment than Sea. However, Harmony Gold is 1.5 times more volatile than Sea. It trades about 0.2 of its potential returns per unit of risk. Sea is currently generating about 0.09 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 Together
Strength	Significant
Accuracy	81.36%
Values	Daily Returns

Harmony Gold Mining  vs.  Sea

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 fragile fundamental indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Sea

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Sea

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

The idea behind Harmony Gold Mining and Sea 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.