Correlation Between Harmony Gold and Molinos Agro

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

Diversification Opportunities for Harmony Gold and Molinos Agro

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Harmony and Molinos is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Molinos Agro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molinos Agro 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 Molinos Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molinos Agro SA has no effect on the direction of Harmony Gold i.e., Harmony Gold and Molinos Agro go up and down completely randomly.

Pair Corralation between Harmony Gold and Molinos Agro

Assuming the 90 days trading horizon Harmony Gold Mining is expected to under-perform the Molinos Agro. In addition to that, Harmony Gold is 1.44 times more volatile than Molinos Agro SA. It trades about -0.08 of its total potential returns per unit of risk. Molinos Agro SA is currently generating about 0.22 per unit of volatility. If you would invest  1,810,000  in Molinos Agro SA on September 5, 2024 and sell it today you would earn a total of  445,000  from holding Molinos Agro SA or generate 24.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Harmony Gold Mining  vs.  Molinos Agro SA

 Performance 
       Timeline  
Harmony Gold Mining 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Molinos Agro SA 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Molinos Agro SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Molinos Agro sustained solid returns over the last few months and may actually be approaching a breakup point.

Harmony Gold and Molinos Agro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Harmony Gold and Molinos Agro

The main advantage of trading using opposite Harmony Gold and Molinos Agro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Molinos Agro 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 Molinos Agro will offset losses from the drop in Molinos Agro's long position.
The idea behind Harmony Gold Mining and Molinos Agro 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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