Correlation Between Harmony Gold and Clarity Gold

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

Diversification Opportunities for Harmony Gold and Clarity Gold

-0.34

Correlation Coefficient

Harmony Gold  Clarity Gold

Very good diversification

The 3 months correlation between Harmony and Clarity is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Clarity Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarity Gold Corp 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 Clarity Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarity Gold Corp has no effect on the direction of Harmony Gold i.e., Harmony Gold and Clarity Gold go up and down completely randomly.

Pair Corralation between Harmony Gold and Clarity Gold

Considering the 90-day investment horizon Harmony Gold Mining is expected to under-perform the Clarity Gold. But the stock apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 2.83 times less risky than Clarity Gold. The stock trades about -0.16 of its potential returns per unit of risk. The Clarity Gold Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.50  in Clarity Gold Corp on September 5, 2024 and sell it today you would earn a total of  0.10  from holding Clarity Gold Corp or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Harmony Gold Mining  vs.  Clarity Gold Corp

Harmony Gold Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Harmony Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Clarity Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarity Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Clarity Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Harmony Gold and Clarity Gold

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

The idea behind Harmony Gold Mining and Clarity Gold Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.