Correlation Between Harmony Gold and NISOURCE

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

Diversification Opportunities for Harmony Gold and NISOURCE

-0.27

Correlation Coefficient

Harmony Gold  NISOURCE

Very good diversification

The 3 months correlation between Harmony and NISOURCE is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and NISOURCE FIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE FIN P 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 NISOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISOURCE FIN P has no effect on the direction of Harmony Gold i.e., Harmony Gold and NISOURCE go up and down completely randomly.

Pair Corralation between Harmony Gold and NISOURCE

Assuming the 90 days horizon Harmony Gold is expected to generate 32.95 times less return on investment than NISOURCE. But when comparing it to its historical volatility, Harmony Gold Mining is 30.04 times less risky than NISOURCE. It trades about 0.09 of its potential returns per unit of risk. NISOURCE FIN P is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  10,373  in NISOURCE FIN P on September 25, 2024 and sell it today you would earn a total of  290.00  from holding NISOURCE FIN P or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.0%
Values	Daily Returns

Harmony Gold Mining  vs.  NISOURCE FIN P

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.

NISOURCE FIN P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Harmony Gold and NISOURCE

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

The idea behind Harmony Gold Mining and NISOURCE FIN P 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.