Correlation Between Sphere Entertainment and Harmony Gold

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

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

Diversification Opportunities for Sphere Entertainment and Harmony Gold

0.54

Correlation Coefficient

Sphere Entertainment  Harmony Gold

Very weak diversification

The 3 months correlation between Sphere and Harmony is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co 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 Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Harmony Gold go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Harmony Gold

Given the investment horizon of 90 days Sphere Entertainment is expected to generate 8.98 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, Sphere Entertainment Co is 2.1 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 0.23 of returns per unit of risk over similar time horizon. If you would invest  827.00  in Harmony Gold Mining on December 2, 2024 and sell it today you would earn a total of  373.00  from holding Harmony Gold Mining or generate 45.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	59.02%
Values	Daily Returns

Sphere Entertainment Co  vs.  Harmony Gold Mining

Sphere Entertainment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical indicators, Sphere Entertainment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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. Despite nearly uncertain fundamental indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sphere Entertainment and Harmony Gold

The main advantage of trading using opposite Sphere Entertainment and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.