Correlation Between Tectonic Metals and Harmony Gold

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

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

Diversification Opportunities for Tectonic Metals and Harmony Gold

0.61

Correlation Coefficient

Tectonic Metals  Harmony Gold

Poor diversification

The 3 months correlation between Tectonic and Harmony is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tectonic Metals 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 Tectonic Metals 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 Tectonic Metals 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 Tectonic Metals i.e., Tectonic Metals and Harmony Gold go up and down completely randomly.

Pair Corralation between Tectonic Metals and Harmony Gold

Assuming the 90 days horizon Tectonic Metals is expected to under-perform the Harmony Gold. In addition to that, Tectonic Metals is 1.3 times more volatile than Harmony Gold Mining. It trades about -0.05 of its total potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.01 per unit of volatility. If you would invest  936.00  in Harmony Gold Mining on September 12, 2024 and sell it today you would lose (15.00) from holding Harmony Gold Mining or give up 1.6% of portfolio value over 90 days.

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

Tectonic Metals  vs.  Harmony Gold Mining

Tectonic Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tectonic Metals 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.

Harmony Gold Mining

Risk-Adjusted Performance

0 of 100

Insignificant

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 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 Tectonic Metals and Harmony Gold

The main advantage of trading using opposite Tectonic Metals and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tectonic Metals 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 Tectonic Metals 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.