Correlation Between Harmony Gold and EMBARQ

Can any of the company-specific risk be diversified away by investing in both Harmony Gold and EMBARQ 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 EMBARQ 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 EMBARQ P 7995, you can compare the effects of market volatilities on Harmony Gold and EMBARQ 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 EMBARQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and EMBARQ.

Diversification Opportunities for Harmony Gold and EMBARQ

-0.22

Correlation Coefficient

Harmony Gold  EMBARQ

Very good diversification

The 3 months correlation between Harmony and EMBARQ is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and EMBARQ P 7995 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMBARQ P 7995 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 EMBARQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMBARQ P 7995 has no effect on the direction of Harmony Gold i.e., Harmony Gold and EMBARQ go up and down completely randomly.

Pair Corralation between Harmony Gold and EMBARQ

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the EMBARQ. But the pink sheet apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 1.15 times less risky than EMBARQ. The pink sheet trades about -0.22 of its potential returns per unit of risk. The EMBARQ P 7995 is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,788  in EMBARQ P 7995 on September 19, 2024 and sell it today you would lose (479.00) from holding EMBARQ P 7995 or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Harmony Gold Mining  vs.  EMBARQ P 7995

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

EMBARQ P 7995

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMBARQ P 7995 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EMBARQ is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Harmony Gold and EMBARQ

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

The idea behind Harmony Gold Mining and EMBARQ P 7995 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.