Correlation Between Harmony Gold and Advtech

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Can any of the company-specific risk be diversified away by investing in both Harmony Gold and Advtech 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 Harmony Gold and Advtech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Harmony Gold Mining and Advtech, you can compare the effects of market volatilities on Harmony Gold and Advtech 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 Harmony Gold with a short position of Advtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and Advtech.

Diversification Opportunities for Harmony Gold and Advtech

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Harmony and Advtech is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Advtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advtech and Harmony 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 Harmony Gold Mining are associated (or correlated) with Advtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advtech has no effect on the direction of Harmony Gold i.e., Harmony Gold and Advtech go up and down completely randomly.

Pair Corralation between Harmony Gold and Advtech

Assuming the 90 days trading horizon Harmony Gold Mining is expected to generate 1.91 times more return on investment than Advtech. However, Harmony Gold is 1.91 times more volatile than Advtech. It trades about 0.29 of its potential returns per unit of risk. Advtech is currently generating about -0.03 per unit of risk. If you would invest  1,081,000  in Harmony Gold Mining on February 23, 2024 and sell it today you would earn a total of  728,000  from holding Harmony Gold Mining or generate 67.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Harmony Gold Mining  vs.  Advtech

 Performance 
       Timeline  
Harmony Gold Mining 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking indicators, Harmony Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.
Advtech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Advtech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Advtech is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Harmony Gold and Advtech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Harmony Gold and Advtech

The main advantage of trading using opposite Harmony Gold and Advtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Advtech 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 Advtech will offset losses from the drop in Advtech's long position.
The idea behind Harmony Gold Mining and Advtech 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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