Correlation Between Harmony Gold and Federal Agricultural

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

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

Diversification Opportunities for Harmony Gold and Federal Agricultural

-0.5

Correlation Coefficient

Harmony Gold  Federal Agricultural

Very good diversification

The 3 months correlation between Harmony and Federal is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural and Harmony Gold 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 Harmony Gold Mining are associated (or correlated) with Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Harmony Gold i.e., Harmony Gold and Federal Agricultural go up and down completely randomly.

Pair Corralation between Harmony Gold and Federal Agricultural

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.53 times more return on investment than Federal Agricultural. However, Harmony Gold is 1.53 times more volatile than Federal Agricultural Mortgage. It trades about 0.06 of its potential returns per unit of risk. Federal Agricultural Mortgage is currently generating about 0.07 per unit of risk. If you would invest  531.00  in Harmony Gold Mining on September 21, 2024 and sell it today you would earn a total of  274.00  from holding Harmony Gold Mining or generate 51.6% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Federal Agricultural Mortgage

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Federal Agricultural

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Agricultural Mortgage are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Federal Agricultural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Federal Agricultural

The main advantage of trading using opposite Harmony Gold and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.

The idea behind Harmony Gold Mining and Federal Agricultural Mortgage 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.