Correlation Between ENTERGY and Harmony Gold

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

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

Diversification Opportunities for ENTERGY and Harmony Gold

-0.29

Correlation Coefficient

ENTERGY  Harmony Gold

Very good diversification

The 3 months correlation between ENTERGY and Harmony is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding ENTERGY 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 ENTERGY 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 ENTERGY 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 ENTERGY i.e., ENTERGY and Harmony Gold go up and down completely randomly.

Pair Corralation between ENTERGY and Harmony Gold

Assuming the 90 days trading horizon ENTERGY is expected to generate 0.75 times more return on investment than Harmony Gold. However, ENTERGY is 1.33 times less risky than Harmony Gold. It trades about 0.13 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.01 per unit of risk. If you would invest  5,701  in ENTERGY on September 18, 2024 and sell it today you would earn a total of  1,249  from holding ENTERGY or generate 21.91% return on investment over 90 days.

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

ENTERGY  vs.  Harmony Gold Mining

ENTERGY

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ENTERGY are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, ENTERGY exhibited 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 nearly stable basic indicators, Harmony Gold is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ENTERGY and Harmony Gold

The main advantage of trading using opposite ENTERGY and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENTERGY 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 ENTERGY 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.