Correlation Between Harmony Gold and San Miguel

Can any of the company-specific risk be diversified away by investing in both Harmony Gold and San Miguel 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 San Miguel 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 San Miguel AG, you can compare the effects of market volatilities on Harmony Gold and San Miguel 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 San Miguel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and San Miguel.

Diversification Opportunities for Harmony Gold and San Miguel

-0.55

Correlation Coefficient

Harmony Gold  San Miguel

Excellent diversification

The 3 months correlation between Harmony and San is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and San Miguel AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Miguel AG 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 San Miguel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Miguel AG has no effect on the direction of Harmony Gold i.e., Harmony Gold and San Miguel go up and down completely randomly.

Pair Corralation between Harmony Gold and San Miguel

Assuming the 90 days trading horizon Harmony Gold Mining is expected to generate 1.09 times more return on investment than San Miguel. However, Harmony Gold is 1.09 times more volatile than San Miguel AG. It trades about 0.42 of its potential returns per unit of risk. San Miguel AG is currently generating about 0.36 per unit of risk. If you would invest  919,250  in Harmony Gold Mining on February 23, 2024 and sell it today you would earn a total of  293,700  from holding Harmony Gold Mining or generate 31.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Harmony Gold Mining  vs.  San Miguel AG

Harmony Gold Mining

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harmony Gold sustained solid returns over the last few months and may actually be approaching a breakup point.

San Miguel AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days San Miguel AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, San Miguel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Harmony Gold and San Miguel

The main advantage of trading using opposite Harmony Gold and San Miguel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, San Miguel 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 San Miguel will offset losses from the drop in San Miguel's long position.

The idea behind Harmony Gold Mining and San Miguel AG 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.