Correlation Between Herc Holdings and Harmony Gold

Can any of the company-specific risk be diversified away by investing in both Herc Holdings and Harmony 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 Herc Holdings and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Herc Holdings and Harmony Gold Mining, you can compare the effects of market volatilities on Herc Holdings and Harmony 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 Herc Holdings with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herc Holdings and Harmony Gold.

Diversification Opportunities for Herc Holdings and Harmony Gold

0.14

Correlation Coefficient

Herc Holdings  Harmony Gold

Average diversification

The 3 months correlation between Herc and Harmony is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining and Herc Holdings 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 Herc Holdings are associated (or correlated) with Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of Herc Holdings i.e., Herc Holdings and Harmony Gold go up and down completely randomly.

Pair Corralation between Herc Holdings and Harmony Gold

Considering the 90-day investment horizon Herc Holdings is expected to generate 3.37 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, Herc Holdings is 1.36 times less risky than Harmony Gold. It trades about 0.03 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  375.00  in Harmony Gold Mining on October 4, 2024 and sell it today you would earn a total of  452.00  from holding Harmony Gold Mining or generate 120.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	65.32%
Values	Daily Returns

Herc Holdings  vs.  Harmony Gold Mining

Herc Holdings

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Herc Holdings and Harmony Gold

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

The idea behind Herc Holdings and Harmony Gold Mining 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.