Correlation Between Standard Bank and Harmony Gold

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

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

Diversification Opportunities for Standard Bank and Harmony Gold

0.23

Correlation Coefficient

Standard Bank  Harmony Gold

Modest diversification

The 3 months correlation between Standard and Harmony is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group 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 Standard Bank 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 Standard Bank Group 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 Standard Bank i.e., Standard Bank and Harmony Gold go up and down completely randomly.

Pair Corralation between Standard Bank and Harmony Gold

Assuming the 90 days trading horizon Standard Bank Group is expected to generate 0.35 times more return on investment than Harmony Gold. However, Standard Bank Group is 2.83 times less risky than Harmony Gold. It trades about 0.09 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.01 per unit of risk. If you would invest  871,886  in Standard Bank Group on September 3, 2024 and sell it today you would earn a total of  54,714  from holding Standard Bank Group or generate 6.28% return on investment over 90 days.

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

Standard Bank Group  vs.  Harmony Gold Mining

Standard Bank Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Bank Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Standard Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Standard Bank and Harmony Gold

The main advantage of trading using opposite Standard Bank and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank 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 Standard Bank Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.