Correlation Between Harmony Gold and Emerson Electric

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

Diversification Opportunities for Harmony Gold and Emerson Electric

-0.41

Correlation Coefficient

Harmony Gold  Emerson Electric

Very good diversification

The 3 months correlation between Harmony and Emerson is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric 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 Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Harmony Gold i.e., Harmony Gold and Emerson Electric go up and down completely randomly.

Pair Corralation between Harmony Gold and Emerson Electric

Considering the 90-day investment horizon Harmony Gold Mining is expected to generate 2.2 times more return on investment than Emerson Electric. However, Harmony Gold is 2.2 times more volatile than Emerson Electric. It trades about 0.09 of its potential returns per unit of risk. Emerson Electric is currently generating about 0.06 per unit of risk. If you would invest  331.00  in Harmony Gold Mining on October 26, 2024 and sell it today you would earn a total of  756.00  from holding Harmony Gold Mining or generate 228.4% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Emerson Electric

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. In spite of fairly strong primary indicators, Harmony Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerson Electric

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Emerson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Emerson Electric

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

The idea behind Harmony Gold Mining and Emerson Electric 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.