Correlation Between Northern Star and Harmony Gold

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

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

Diversification Opportunities for Northern Star and Harmony Gold

0.62

Correlation Coefficient

Northern Star  Harmony Gold

Poor diversification

The 3 months correlation between Northern and Harmony is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Northern Star Resources 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 Northern Star 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 Northern Star Resources 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 Northern Star i.e., Northern Star and Harmony Gold go up and down completely randomly.

Pair Corralation between Northern Star and Harmony Gold

Assuming the 90 days horizon Northern Star Resources is expected to generate 0.71 times more return on investment than Harmony Gold. However, Northern Star Resources is 1.41 times less risky than Harmony Gold. It trades about -0.17 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.17 per unit of risk. If you would invest  1,192  in Northern Star Resources on September 4, 2024 and sell it today you would lose (113.00) from holding Northern Star Resources or give up 9.48% of portfolio value over 90 days.

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

Northern Star Resources  vs.  Harmony Gold Mining

Northern Star Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Star Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Northern Star reported solid returns over the last few months and may actually be approaching a breakup point.

Harmony Gold Mining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Harmony Gold is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Northern Star and Harmony Gold

The main advantage of trading using opposite Northern Star and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Star 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 Northern Star Resources 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.