Correlation Between Harmony Gold and Cabral Gold

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

Diversification Opportunities for Harmony Gold and Cabral Gold

0.58

Correlation Coefficient

Harmony Gold  Cabral Gold

Very weak diversification

The 3 months correlation between Harmony and Cabral is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Cabral Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabral Gold 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 Cabral Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabral Gold has no effect on the direction of Harmony Gold i.e., Harmony Gold and Cabral Gold go up and down completely randomly.

Pair Corralation between Harmony Gold and Cabral Gold

Considering the 90-day investment horizon Harmony Gold Mining is expected to generate 0.44 times more return on investment than Cabral Gold. However, Harmony Gold Mining is 2.27 times less risky than Cabral Gold. It trades about 0.01 of its potential returns per unit of risk. Cabral Gold is currently generating about -0.04 per unit of risk. If you would invest  947.00  in Harmony Gold Mining on September 12, 2024 and sell it today you would lose (18.00) from holding Harmony Gold Mining or give up 1.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Harmony Gold Mining  vs.  Cabral Gold

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. In spite of fairly strong primary indicators, Harmony Gold is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Cabral Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabral Gold 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 Cabral Gold

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

The idea behind Harmony Gold Mining and Cabral Gold 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.