Correlation Between Harmony Gold and American Express

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

Diversification Opportunities for Harmony Gold and American Express

-0.12

Correlation Coefficient

Harmony Gold  American Express

Good diversification

The 3 months correlation between Harmony and American is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Harmony Gold i.e., Harmony Gold and American Express go up and down completely randomly.

Pair Corralation between Harmony Gold and American Express

Assuming the 90 days trading horizon Harmony Gold is expected to generate 27.02 times less return on investment than American Express. In addition to that, Harmony Gold is 1.61 times more volatile than American Express Co. It trades about 0.0 of its total potential returns per unit of risk. American Express Co is currently generating about 0.16 per unit of volatility. If you would invest  2,092,500  in American Express Co on October 26, 2024 and sell it today you would earn a total of  390,000  from holding American Express Co or generate 18.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Harmony Gold Mining  vs.  American Express Co

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.

American Express

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Express Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, American Express sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and American Express

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

The idea behind Harmony Gold Mining and American Express Co 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.