Correlation Between Transportadora and Harmony Gold

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

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

Diversification Opportunities for Transportadora and Harmony Gold

-0.21

Correlation Coefficient

Transportadora  Harmony Gold

Very good diversification

The 3 months correlation between Transportadora and Harmony is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas 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 Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and Harmony Gold go up and down completely randomly.

Pair Corralation between Transportadora and Harmony Gold

Assuming the 90 days trading horizon Transportadora de Gas is expected to under-perform the Harmony Gold. In addition to that, Transportadora is 1.23 times more volatile than Harmony Gold Mining. It trades about 0.0 of its total potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.18 per unit of volatility. If you would invest  994,000  in Harmony Gold Mining on November 28, 2024 and sell it today you would earn a total of  331,000  from holding Harmony Gold Mining or generate 33.3% return on investment over 90 days.

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

Transportadora de Gas  vs.  Harmony Gold Mining

Transportadora de Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transportadora de Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Transportadora is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Harmony Gold Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harmony Gold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transportadora and Harmony Gold

The main advantage of trading using opposite Transportadora and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.