Correlation Between Kumba Iron and Harmony Gold

Can any of the company-specific risk be diversified away by investing in both Kumba Iron and Harmony 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 Kumba Iron and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kumba Iron Ore and Harmony Gold Mining, you can compare the effects of market volatilities on Kumba Iron and Harmony 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 Kumba Iron with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kumba Iron and Harmony Gold.

Diversification Opportunities for Kumba Iron and Harmony Gold

0.15

Correlation Coefficient

Kumba Iron  Harmony Gold

Average diversification

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

Pair Corralation between Kumba Iron and Harmony Gold

Assuming the 90 days trading horizon Kumba Iron Ore is expected to under-perform the Harmony Gold. But the stock apears to be less risky and, when comparing its historical volatility, Kumba Iron Ore is 1.29 times less risky than Harmony Gold. The stock trades about 0.0 of its potential returns per unit of risk. The Harmony Gold Mining is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,709,300  in Harmony Gold Mining on September 1, 2024 and sell it today you would lose (59,300) from holding Harmony Gold Mining or give up 3.47% of portfolio value over 90 days.

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

Kumba Iron Ore  vs.  Harmony Gold Mining

Kumba Iron Ore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kumba Iron Ore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Kumba Iron is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 rather sound technical and fundamental indicators, Harmony Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kumba Iron and Harmony Gold

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

The idea behind Kumba Iron Ore and Harmony Gold Mining 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.