Correlation Between China XD and Harmony Gold

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

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

Diversification Opportunities for China XD and Harmony Gold

0.46

Correlation Coefficient

China XD  Harmony Gold

Very weak diversification

The 3 months correlation between China and Harmony is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding China XD Plastics 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 China XD 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 China XD Plastics 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 China XD i.e., China XD and Harmony Gold go up and down completely randomly.

Pair Corralation between China XD and Harmony Gold

If you would invest  800.00  in Harmony Gold Mining on January 28, 2024 and sell it today you would earn a total of  100.00  from holding Harmony Gold Mining or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

China XD Plastics  vs.  Harmony Gold Mining

China XD Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Harmony Gold Mining

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China XD and Harmony Gold

The main advantage of trading using opposite China XD and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China XD 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 China XD Plastics 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.