Correlation Between Ternium SA and Harmony Gold

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

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

Diversification Opportunities for Ternium SA and Harmony Gold

0.81

Correlation Coefficient

Ternium SA  Harmony Gold

Very poor diversification

The 3 months correlation between Ternium and Harmony is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ternium SA DRC 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 Ternium SA 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 Ternium SA DRC 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 Ternium SA i.e., Ternium SA and Harmony Gold go up and down completely randomly.

Pair Corralation between Ternium SA and Harmony Gold

Assuming the 90 days trading horizon Ternium SA is expected to generate 4.95 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, Ternium SA DRC is 1.74 times less risky than Harmony Gold. It trades about 0.18 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  961,000  in Harmony Gold Mining on October 20, 2024 and sell it today you would earn a total of  191,500  from holding Harmony Gold Mining or generate 19.93% return on investment over 90 days.

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

Ternium SA DRC  vs.  Harmony Gold Mining

Ternium SA DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ternium SA DRC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ternium SA and Harmony Gold

The main advantage of trading using opposite Ternium SA and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ternium SA 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 Ternium SA DRC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.