Correlation Between American Pacific and Harmony Gold

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

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

Diversification Opportunities for American Pacific and Harmony Gold

0.38

Correlation Coefficient

American Pacific  Harmony Gold

Weak diversification

The 3 months correlation between American and Harmony is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding American Pacific Mining 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 American Pacific 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 American Pacific Mining 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 American Pacific i.e., American Pacific and Harmony Gold go up and down completely randomly.

Pair Corralation between American Pacific and Harmony Gold

Assuming the 90 days horizon American Pacific Mining is expected to under-perform the Harmony Gold. In addition to that, American Pacific is 2.14 times more volatile than Harmony Gold Mining. It trades about -0.01 of its total potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.08 per unit of volatility. If you would invest  892.00  in Harmony Gold Mining on December 1, 2024 and sell it today you would earn a total of  103.00  from holding Harmony Gold Mining or generate 11.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

American Pacific Mining  vs.  Harmony Gold Mining

American Pacific Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Pacific Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, American Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Harmony Gold Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Harmony Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Pacific and Harmony Gold

The main advantage of trading using opposite American Pacific and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Pacific 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 American Pacific Mining 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.