Correlation Between Seadrill and Harmony Gold

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

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

Diversification Opportunities for Seadrill and Harmony Gold

0.09

Correlation Coefficient

Seadrill  Harmony Gold

Significant diversification

The 3 months correlation between Seadrill and Harmony is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Seadrill Limited 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 Seadrill 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 Seadrill Limited 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 Seadrill i.e., Seadrill and Harmony Gold go up and down completely randomly.

Pair Corralation between Seadrill and Harmony Gold

Given the investment horizon of 90 days Seadrill is expected to generate 6.88 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, Seadrill Limited is 1.59 times less risky than Harmony Gold. It trades about 0.02 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  375.00  in Harmony Gold Mining on September 27, 2024 and sell it today you would earn a total of  575.00  from holding Harmony Gold Mining or generate 153.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	65.39%
Values	Daily Returns

Seadrill Limited  vs.  Harmony Gold Mining

Seadrill Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 latest conflicting performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Seadrill and Harmony Gold

The main advantage of trading using opposite Seadrill and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seadrill 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 Seadrill Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.