Correlation Between Harmony Gold and Vulcan Materials

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

Diversification Opportunities for Harmony Gold and Vulcan Materials

0.27

Correlation Coefficient

Harmony Gold  Vulcan Materials

Modest diversification

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

Pair Corralation between Harmony Gold and Vulcan Materials

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 2.68 times more return on investment than Vulcan Materials. However, Harmony Gold is 2.68 times more volatile than Vulcan Materials. It trades about 0.09 of its potential returns per unit of risk. Vulcan Materials is currently generating about 0.06 per unit of risk. If you would invest  372.00  in Harmony Gold Mining on October 25, 2024 and sell it today you would earn a total of  577.00  from holding Harmony Gold Mining or generate 155.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.18%
Values	Daily Returns

Harmony Gold Mining  vs.  Vulcan Materials

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 fragile 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.

Vulcan Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Harmony Gold and Vulcan Materials

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

The idea behind Harmony Gold Mining and Vulcan Materials 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.