Correlation Between Guidewire Software and Harmony Gold

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

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

Diversification Opportunities for Guidewire Software and Harmony Gold

0.08

Correlation Coefficient

Guidewire Software  Harmony Gold

Significant diversification

The 3 months correlation between Guidewire and Harmony is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Guidewire Software 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 Guidewire Software 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 Guidewire Software 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 Guidewire Software i.e., Guidewire Software and Harmony Gold go up and down completely randomly.

Pair Corralation between Guidewire Software and Harmony Gold

Assuming the 90 days trading horizon Guidewire Software is expected to generate 1.27 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, Guidewire Software is 1.39 times less risky than Harmony Gold. It trades about 0.05 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  805.00  in Harmony Gold Mining on September 12, 2024 and sell it today you would earn a total of  50.00  from holding Harmony Gold Mining or generate 6.21% return on investment over 90 days.

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

Guidewire Software  vs.  Harmony Gold Mining

Guidewire Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guidewire Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Guidewire Software may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Harmony Gold Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Harmony Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Guidewire Software and Harmony Gold

The main advantage of trading using opposite Guidewire Software and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidewire Software 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 Guidewire Software 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.