Correlation Between BHP Group and Harmony Gold
Can any of the company-specific risk be diversified away by investing in both BHP Group 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 BHP Group and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group Limited and Harmony Gold Mining, you can compare the effects of market volatilities on BHP Group 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 BHP Group with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Harmony Gold.
Diversification Opportunities for BHP Group and Harmony Gold
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BHP and Harmony is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited 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 BHP Group 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 BHP Group Limited 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 BHP Group i.e., BHP Group and Harmony Gold go up and down completely randomly.
Pair Corralation between BHP Group and Harmony Gold
Assuming the 90 days trading horizon BHP Group Limited is expected to generate 0.56 times more return on investment than Harmony Gold. However, BHP Group Limited is 1.78 times less risky than Harmony Gold. It trades about -0.25 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.36 per unit of risk. If you would invest 3,265,000 in BHP Group Limited on August 31, 2024 and sell it today you would lose (340,000) from holding BHP Group Limited or give up 10.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
BHP Group Limited vs. Harmony Gold Mining
Performance |
| Timeline |
| BHP Group Limited |
| Harmony Gold Mining |
BHP Group and Harmony Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Harmony Gold
The main advantage of trading using opposite BHP Group and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group 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.| BHP Group vs. Harmony Gold Mining | BHP Group vs. Transportadora de Gas | BHP Group vs. United States Steel | BHP Group vs. Compania de Transporte |
| Harmony Gold vs. Transportadora de Gas | Harmony Gold vs. Compania de Transporte | Harmony Gold vs. United States Steel |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |