Correlation Between Pan African and Harmony Gold

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

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

Diversification Opportunities for Pan African and Harmony Gold

0.71

Correlation Coefficient

Pan African  Harmony Gold

Poor diversification

The 3 months correlation between Pan and Harmony is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pan African 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 Pan African 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 Pan African 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 Pan African i.e., Pan African and Harmony Gold go up and down completely randomly.

Pair Corralation between Pan African and Harmony Gold

Assuming the 90 days trading horizon Pan African is expected to generate 1.68 times less return on investment than Harmony Gold. In addition to that, Pan African is 1.05 times more volatile than Harmony Gold Mining. It trades about 0.14 of its total potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.24 per unit of volatility. If you would invest  1,563,900  in Harmony Gold Mining on December 27, 2024 and sell it today you would earn a total of  753,200  from holding Harmony Gold Mining or generate 48.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Pan African Resources  vs.  Harmony Gold Mining

Pan African Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pan African Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Pan African exhibited solid returns over the last few months and may actually be approaching a breakup point.

Harmony Gold Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 18 (%) 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 Pan African and Harmony Gold

The main advantage of trading using opposite Pan African and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan African 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 Pan African 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.