Correlation Between Harmony Gold and Titan Machinery

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

Diversification Opportunities for Harmony Gold and Titan Machinery

-0.15

Correlation Coefficient

Harmony Gold  Titan Machinery

Good diversification

The 3 months correlation between Harmony and Titan is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery 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 Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of Harmony Gold i.e., Harmony Gold and Titan Machinery go up and down completely randomly.

Pair Corralation between Harmony Gold and Titan Machinery

Considering the 90-day investment horizon Harmony Gold Mining is expected to generate 1.14 times more return on investment than Titan Machinery. However, Harmony Gold is 1.14 times more volatile than Titan Machinery. It trades about -0.22 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.27 per unit of risk. If you would invest  963.00  in Harmony Gold Mining on September 23, 2024 and sell it today you would lose (120.00) from holding Harmony Gold Mining or give up 12.46% of portfolio value over 90 days.

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

Harmony Gold Mining  vs.  Titan Machinery

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 unfluctuating performance in the last few months, the Stock's primary indicators remain fairly 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.

Titan Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Titan Machinery is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Harmony Gold and Titan Machinery

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

The idea behind Harmony Gold Mining and Titan Machinery 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.