Correlation Between Harmony Gold and Labrador Gold

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

Diversification Opportunities for Harmony Gold and Labrador Gold

0.3

Correlation Coefficient

Harmony Gold  Labrador Gold

Weak diversification

The 3 months correlation between Harmony and Labrador is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Labrador Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labrador 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 Labrador Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labrador Gold Corp has no effect on the direction of Harmony Gold i.e., Harmony Gold and Labrador Gold go up and down completely randomly.

Pair Corralation between Harmony Gold and Labrador Gold

Considering the 90-day investment horizon Harmony Gold Mining is expected to generate 0.46 times more return on investment than Labrador Gold. However, Harmony Gold Mining is 2.16 times less risky than Labrador Gold. It trades about 0.03 of its potential returns per unit of risk. Labrador Gold Corp is currently generating about -0.03 per unit of risk. If you would invest  888.00  in Harmony Gold Mining on September 5, 2024 and sell it today you would earn a total of  30.00  from holding Harmony Gold Mining or generate 3.38% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Labrador 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.

Labrador Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Labrador Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Harmony Gold and Labrador Gold

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

The idea behind Harmony Gold Mining and Labrador 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.