Correlation Between Ambev SA and Harmony Gold

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

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

Diversification Opportunities for Ambev SA and Harmony Gold

-0.31

Correlation Coefficient

Ambev SA  Harmony Gold

Very good diversification

The 24 months correlation between Ambev and Harmony is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ambev SA ADR 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 Ambev SA 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 Ambev SA ADR 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 Ambev SA i.e., Ambev SA and Harmony Gold go up and down completely randomly.

Pair Corralation between Ambev SA and Harmony Gold

Given the investment horizon of 90 days Ambev SA ADR is expected to under-perform the Harmony Gold. But the stock apears to be less risky and, when comparing its historical volatility, Ambev SA ADR is 2.94 times less risky than Harmony Gold. The stock trades about -0.05 of its potential returns per unit of risk. The Harmony Gold Mining is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  456.00  in Harmony Gold Mining on February 20, 2024 and sell it today you would earn a total of  544.00  from holding Harmony Gold Mining or generate 119.3% return on investment over 90 days.

Time Period	24 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Ambev SA ADR  vs.  Harmony Gold Mining

Ambev SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Ambev SA is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Harmony Gold Mining

Risk-Adjusted Performance

5 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambev SA and Harmony Gold

The main advantage of trading using opposite Ambev SA and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ambev SA 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 Ambev SA ADR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.