Correlation Between Harmony Gold and UPM Kymmene

Can any of the company-specific risk be diversified away by investing in both Harmony Gold and UPM Kymmene 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 UPM Kymmene 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 UPM Kymmene Oyj, you can compare the effects of market volatilities on Harmony Gold and UPM Kymmene 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 UPM Kymmene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and UPM Kymmene.

Diversification Opportunities for Harmony Gold and UPM Kymmene

0.36

Correlation Coefficient

Harmony Gold  UPM Kymmene

Weak diversification

The 3 months correlation between Harmony and UPM is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and UPM Kymmene Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPM Kymmene Oyj 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 UPM Kymmene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPM Kymmene Oyj has no effect on the direction of Harmony Gold i.e., Harmony Gold and UPM Kymmene go up and down completely randomly.

Pair Corralation between Harmony Gold and UPM Kymmene

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 2.33 times more return on investment than UPM Kymmene. However, Harmony Gold is 2.33 times more volatile than UPM Kymmene Oyj. It trades about 0.06 of its potential returns per unit of risk. UPM Kymmene Oyj is currently generating about -0.02 per unit of risk. If you would invest  332.00  in Harmony Gold Mining on September 28, 2024 and sell it today you would earn a total of  448.00  from holding Harmony Gold Mining or generate 134.94% return on investment over 90 days.

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

Harmony Gold Mining  vs.  UPM Kymmene Oyj

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.

UPM Kymmene Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UPM Kymmene Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Harmony Gold and UPM Kymmene

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

The idea behind Harmony Gold Mining and UPM Kymmene Oyj 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.