Correlation Between Summit Materials and Harmony Gold

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

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

Diversification Opportunities for Summit Materials and Harmony Gold

-0.46

Correlation Coefficient

Summit Materials  Harmony Gold

Very good diversification

The 3 months correlation between Summit and Harmony is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials 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 Summit Materials 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 Summit Materials 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 Summit Materials i.e., Summit Materials and Harmony Gold go up and down completely randomly.

Pair Corralation between Summit Materials and Harmony Gold

Considering the 90-day investment horizon Summit Materials is expected to generate 0.5 times more return on investment than Harmony Gold. However, Summit Materials is 1.98 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 -0.11 per unit of risk. If you would invest  4,852  in Summit Materials on September 19, 2024 and sell it today you would earn a total of  225.00  from holding Summit Materials or generate 4.64% return on investment over 90 days.

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

Summit Materials  vs.  Harmony Gold Mining

Summit Materials

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Summit Materials and Harmony Gold

The main advantage of trading using opposite Summit Materials and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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 Summit Materials 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.