Correlation Between Solstice Gold and Harmony Gold

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

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

Diversification Opportunities for Solstice Gold and Harmony Gold

0.33

Correlation Coefficient

Solstice Gold  Harmony Gold

Weak diversification

The 3 months correlation between Solstice and Harmony is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Solstice Gold Corp 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 Solstice 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 Solstice Gold Corp 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 Solstice Gold i.e., Solstice Gold and Harmony Gold go up and down completely randomly.

Pair Corralation between Solstice Gold and Harmony Gold

Assuming the 90 days horizon Solstice Gold Corp is expected to generate 10.02 times more return on investment than Harmony Gold. However, Solstice Gold is 10.02 times more volatile than Harmony Gold Mining. It trades about 0.1 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  2.00  in Solstice Gold Corp on September 9, 2024 and sell it today you would lose (0.53) from holding Solstice Gold Corp or give up 26.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Solstice Gold Corp  vs.  Harmony Gold Mining

Solstice Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solstice Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Solstice Gold reported solid returns over the last few months and may actually be approaching a breakup point.

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Solstice Gold and Harmony Gold

The main advantage of trading using opposite Solstice Gold and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solstice Gold 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 Solstice Gold Corp 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.