Correlation Between Harmony Gold and American Funds

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

Diversification Opportunities for Harmony Gold and American Funds

-0.28

Correlation Coefficient

Harmony Gold  American Funds

Very good diversification

The 3 months correlation between Harmony and American is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of Harmony Gold i.e., Harmony Gold and American Funds go up and down completely randomly.

Pair Corralation between Harmony Gold and American Funds

Considering the 90-day investment horizon Harmony Gold Mining is expected to generate 2.26 times more return on investment than American Funds. However, Harmony Gold is 2.26 times more volatile than American Funds Growth. It trades about 0.25 of its potential returns per unit of risk. American Funds Growth is currently generating about -0.1 per unit of risk. If you would invest  831.00  in Harmony Gold Mining on December 25, 2024 and sell it today you would earn a total of  442.00  from holding Harmony Gold Mining or generate 53.19% return on investment over 90 days.

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

Harmony Gold Mining  vs.  American Funds Growth

Harmony Gold Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Harmony Gold showed solid returns over the last few months and may actually be approaching a breakup point.

American Funds Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Funds Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Harmony Gold and American Funds

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

The idea behind Harmony Gold Mining and American Funds Growth 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.