Correlation Between Harmony Gold and Embotelladora Andina

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

Diversification Opportunities for Harmony Gold and Embotelladora Andina

0.57

Correlation Coefficient

Harmony Gold  Embotelladora Andina

Very weak diversification

The 3 months correlation between Harmony and Embotelladora is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Embotelladora Andina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embotelladora Andina 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 Embotelladora Andina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embotelladora Andina has no effect on the direction of Harmony Gold i.e., Harmony Gold and Embotelladora Andina go up and down completely randomly.

Pair Corralation between Harmony Gold and Embotelladora Andina

Assuming the 90 days trading horizon Harmony Gold Mining is expected to generate 0.61 times more return on investment than Embotelladora Andina. However, Harmony Gold Mining is 1.65 times less risky than Embotelladora Andina. It trades about 0.68 of its potential returns per unit of risk. Embotelladora Andina SA is currently generating about 0.12 per unit of risk. If you would invest  976,000  in Harmony Gold Mining on October 25, 2024 and sell it today you would earn a total of  274,000  from holding Harmony Gold Mining or generate 28.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Harmony Gold Mining  vs.  Embotelladora Andina SA

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 somewhat strong basic indicators, Harmony Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Embotelladora Andina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embotelladora Andina SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Embotelladora Andina 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 Embotelladora Andina

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

The idea behind Harmony Gold Mining and Embotelladora Andina SA 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.