Correlation Between Harmony Gold and Neogen

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

Diversification Opportunities for Harmony Gold and Neogen

0.5

Correlation Coefficient

Harmony Gold  Neogen

Very weak diversification

The 3 months correlation between Harmony and Neogen is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Neogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neogen 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 Neogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neogen has no effect on the direction of Harmony Gold i.e., Harmony Gold and Neogen go up and down completely randomly.

Pair Corralation between Harmony Gold and Neogen

Considering the 90-day investment horizon Harmony Gold Mining is expected to under-perform the Neogen. But the stock apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 1.07 times less risky than Neogen. The stock trades about -0.26 of its potential returns per unit of risk. The Neogen is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,270  in Neogen on October 12, 2024 and sell it today you would earn a total of  37.00  from holding Neogen or generate 2.91% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Neogen

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 latest uncertain performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Neogen

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Harmony Gold and Neogen

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

The idea behind Harmony Gold Mining and Neogen 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.

Check out your portfolio center.

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.