Correlation Between United States and Harmony Gold

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

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

Diversification Opportunities for United States and Harmony Gold

0.91

Correlation Coefficient

United States  Harmony Gold

Almost no diversification

The 3 months correlation between United and Harmony is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Harmony Gold go up and down completely randomly.

Pair Corralation between United States and Harmony Gold

Given the investment horizon of 90 days United States is expected to generate 1.55 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, United States Steel is 1.17 times less risky than Harmony Gold. It trades about 0.25 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  965,000  in Harmony Gold Mining on December 29, 2024 and sell it today you would earn a total of  872,500  from holding Harmony Gold Mining or generate 90.41% return on investment over 90 days.

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

United States Steel  vs.  Harmony Gold Mining

United States Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, United States sustained solid returns over the last few months and may actually be approaching a breakup point.

Harmony Gold Mining

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 26 (%) 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 United States and Harmony Gold

The main advantage of trading using opposite United States and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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.

Check out your portfolio center.

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.