Correlation Between Kaiser Aluminum and Harmony Gold

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

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

Diversification Opportunities for Kaiser Aluminum and Harmony Gold

-0.02

Correlation Coefficient

Kaiser Aluminum  Harmony Gold

Good diversification

The 3 months correlation between Kaiser and Harmony is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and Harmony Gold go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Harmony Gold

Given the investment horizon of 90 days Kaiser Aluminum is expected to under-perform the Harmony Gold. But the stock apears to be less risky and, when comparing its historical volatility, Kaiser Aluminum is 1.03 times less risky than Harmony Gold. The stock trades about -0.04 of its potential returns per unit of risk. The Harmony Gold Mining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  835.00  in Harmony Gold Mining on September 23, 2024 and sell it today you would earn a total of  115.00  from holding Harmony Gold Mining or generate 13.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

Kaiser Aluminum  vs.  Harmony Gold Mining

Kaiser Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 nearly stable fundamental indicators, Harmony Gold is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kaiser Aluminum and Harmony Gold

The main advantage of trading using opposite Kaiser Aluminum and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.