Correlation Between Harmony Gold and Transocean

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

Diversification Opportunities for Harmony Gold and Transocean

-0.11

Correlation Coefficient

Harmony Gold  Transocean

Good diversification

The 3 months correlation between Harmony and Transocean is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Harmony Gold i.e., Harmony Gold and Transocean go up and down completely randomly.

Pair Corralation between Harmony Gold and Transocean

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the Transocean. In addition to that, Harmony Gold is 1.14 times more volatile than Transocean. It trades about -0.02 of its total potential returns per unit of risk. Transocean is currently generating about 0.04 per unit of volatility. If you would invest  417.00  in Transocean on September 5, 2024 and sell it today you would earn a total of  24.00  from holding Transocean or generate 5.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Harmony Gold Mining  vs.  Transocean

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 fundamental indicators, Harmony Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Transocean

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Harmony Gold and Transocean

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

The idea behind Harmony Gold Mining and Transocean 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.