Correlation Between Kap Industrial and Harmony Gold

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

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

Diversification Opportunities for Kap Industrial and Harmony Gold

-0.66

Correlation Coefficient

Kap Industrial  Harmony Gold

Excellent diversification

The 3 months correlation between Kap and Harmony is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Kap Industrial 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 Kap Industrial 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 Kap Industrial 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 Kap Industrial i.e., Kap Industrial and Harmony Gold go up and down completely randomly.

Pair Corralation between Kap Industrial and Harmony Gold

Assuming the 90 days trading horizon Kap Industrial Holdings is expected to generate 1.37 times more return on investment than Harmony Gold. However, Kap Industrial is 1.37 times more volatile than Harmony Gold Mining. It trades about 0.14 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.25 per unit of risk. If you would invest  26,300  in Kap Industrial Holdings on December 4, 2024 and sell it today you would earn a total of  2,800  from holding Kap Industrial Holdings or generate 10.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Kap Industrial Holdings  vs.  Harmony Gold Mining

Kap Industrial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kap Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Harmony Gold Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Harmony Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kap Industrial and Harmony Gold

The main advantage of trading using opposite Kap Industrial and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kap Industrial 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 Kap Industrial 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.