Correlation Between Capex SA and Harmony Gold

Can any of the company-specific risk be diversified away by investing in both Capex 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 Capex 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 Capex SA and Harmony Gold Mining, you can compare the effects of market volatilities on Capex 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 Capex SA with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capex SA and Harmony Gold.

Diversification Opportunities for Capex SA and Harmony Gold

-0.67

Correlation Coefficient

Capex SA  Harmony Gold

Excellent diversification

The 3 months correlation between Capex and Harmony is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Capex SA 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 Capex 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 Capex SA 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 Capex SA i.e., Capex SA and Harmony Gold go up and down completely randomly.

Pair Corralation between Capex SA and Harmony Gold

Assuming the 90 days trading horizon Capex SA is expected to generate 0.88 times more return on investment than Harmony Gold. However, Capex SA is 1.14 times less risky than Harmony Gold. It trades about 0.15 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.06 per unit of risk. If you would invest  627,000  in Capex SA on September 12, 2024 and sell it today you would earn a total of  194,000  from holding Capex SA or generate 30.94% return on investment over 90 days.

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

Capex SA  vs.  Harmony Gold Mining

Capex SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capex SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Capex SA sustained solid returns over the last few months and may actually be approaching a breakup point.

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Capex SA and Harmony Gold

The main advantage of trading using opposite Capex SA and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capex 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 Capex SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.