Correlation Between Harmony Gold and Metrogas

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

Diversification Opportunities for Harmony Gold and Metrogas

-0.79

Correlation Coefficient

Harmony Gold  Metrogas

Pay attention - limited upside

The 3 months correlation between Harmony and Metrogas is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Metrogas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrogas SA 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 Metrogas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrogas SA has no effect on the direction of Harmony Gold i.e., Harmony Gold and Metrogas go up and down completely randomly.

Pair Corralation between Harmony Gold and Metrogas

Assuming the 90 days trading horizon Harmony Gold Mining is expected to under-perform the Metrogas. In addition to that, Harmony Gold is 1.17 times more volatile than Metrogas SA. It trades about -0.06 of its total potential returns per unit of risk. Metrogas SA is currently generating about 0.4 per unit of volatility. If you would invest  127,500  in Metrogas SA on September 12, 2024 and sell it today you would earn a total of  142,500  from holding Metrogas SA or generate 111.76% return on investment over 90 days.

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

Harmony Gold Mining  vs.  Metrogas SA

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.

Metrogas SA

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Metrogas SA are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Metrogas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and Metrogas

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

The idea behind Harmony Gold Mining and Metrogas SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.