Correlation Between Micron Technology and Harmony Gold

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

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

Diversification Opportunities for Micron Technology and Harmony Gold

0.42

Correlation Coefficient

Micron Technology  Harmony Gold

Very weak diversification

The 3 months correlation between Micron and Harmony is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology 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 Micron Technology 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 Micron Technology 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 Micron Technology i.e., Micron Technology and Harmony Gold go up and down completely randomly.

Pair Corralation between Micron Technology and Harmony Gold

Assuming the 90 days trading horizon Micron Technology is expected to generate 1.58 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, Micron Technology is 1.19 times less risky than Harmony Gold. It trades about 0.05 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  365.00  in Harmony Gold Mining on October 3, 2024 and sell it today you would earn a total of  415.00  from holding Harmony Gold Mining or generate 113.7% return on investment over 90 days.

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

Micron Technology  vs.  Harmony Gold Mining

Micron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The current 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 latest fragile 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 Micron Technology and Harmony Gold

The main advantage of trading using opposite Micron Technology and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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 Micron Technology 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.