Correlation Between Harmony Gold and NIKE

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

Diversification Opportunities for Harmony Gold and NIKE

0.73

Correlation Coefficient

Harmony Gold  NIKE

Poor diversification

The 3 months correlation between Harmony and NIKE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and NIKE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKE Inc 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 NIKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKE Inc has no effect on the direction of Harmony Gold i.e., Harmony Gold and NIKE go up and down completely randomly.

Pair Corralation between Harmony Gold and NIKE

Assuming the 90 days trading horizon Harmony Gold Mining is expected to generate 1.53 times more return on investment than NIKE. However, Harmony Gold is 1.53 times more volatile than NIKE Inc. It trades about 0.13 of its potential returns per unit of risk. NIKE Inc is currently generating about 0.08 per unit of risk. If you would invest  118,200  in Harmony Gold Mining on September 19, 2024 and sell it today you would earn a total of  861,800  from holding Harmony Gold Mining or generate 729.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Harmony Gold Mining  vs.  NIKE Inc

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. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NIKE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIKE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Harmony Gold and NIKE

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

The idea behind Harmony Gold Mining and NIKE Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.