Correlation Between Harmony Gold and Gold Fields

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

Diversification Opportunities for Harmony Gold and Gold Fields

0.9

Correlation Coefficient

Harmony Gold  Gold Fields

Almost no diversification

The 3 months correlation between Harmony and Gold is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Gold Fields Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields 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 Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of Harmony Gold i.e., Harmony Gold and Gold Fields go up and down completely randomly.

Pair Corralation between Harmony Gold and Gold Fields

Assuming the 90 days trading horizon Harmony Gold Mining is expected to under-perform the Gold Fields. In addition to that, Harmony Gold is 1.22 times more volatile than Gold Fields Ltd. It trades about -0.09 of its total potential returns per unit of risk. Gold Fields Ltd is currently generating about -0.05 per unit of volatility. If you would invest  1,802,500  in Gold Fields Ltd on September 14, 2024 and sell it today you would lose (212,500) from holding Gold Fields Ltd or give up 11.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Harmony Gold Mining  vs.  Gold Fields Ltd

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gold Fields

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Fields Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Harmony Gold and Gold Fields

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

The idea behind Harmony Gold Mining and Gold Fields Ltd 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.