Correlation Between Harmony Gold and Central Puerto

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

Diversification Opportunities for Harmony Gold and Central Puerto

-0.83

Correlation Coefficient

Harmony Gold  Central Puerto

Pay attention - limited upside

The 3 months correlation between Harmony and Central is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Central Puerto SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Puerto SA 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 Central Puerto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Puerto SA has no effect on the direction of Harmony Gold i.e., Harmony Gold and Central Puerto go up and down completely randomly.

Pair Corralation between Harmony Gold and Central Puerto

Assuming the 90 days trading horizon Harmony Gold Mining is expected to under-perform the Central Puerto. But the stock apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 1.69 times less risky than Central Puerto. The stock trades about -0.05 of its potential returns per unit of risk. The Central Puerto SA is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  155,000  in Central Puerto SA on October 9, 2024 and sell it today you would earn a total of  35,000  from holding Central Puerto SA or generate 22.58% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Central Puerto 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Central Puerto SA

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Central Puerto SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Puerto sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Central Puerto

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

The idea behind Harmony Gold Mining and Central Puerto 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.