Correlation Between Beta Systems and Harmony Gold
Can any of the company-specific risk be diversified away by investing in both Beta Systems 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 Beta Systems and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beta Systems Software and Harmony Gold Mining, you can compare the effects of market volatilities on Beta Systems 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 Beta Systems with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beta Systems and Harmony Gold.
Diversification Opportunities for Beta Systems and Harmony Gold
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Beta and Harmony is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Beta Systems Software 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 Beta Systems 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 Beta Systems Software 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 Beta Systems i.e., Beta Systems and Harmony Gold go up and down completely randomly.
Pair Corralation between Beta Systems and Harmony Gold
Assuming the 90 days horizon Beta Systems Software is expected to under-perform the Harmony Gold. But the stock apears to be less risky and, when comparing its historical volatility, Beta Systems Software is 1.82 times less risky than Harmony Gold. The stock trades about -0.07 of its potential returns per unit of risk. The Harmony Gold Mining is currently generating about 0.58 of returns per unit of risk over similar time horizon. If you would invest 795.00 in Harmony Gold Mining on November 7, 2024 and sell it today you would earn a total of 305.00 from holding Harmony Gold Mining or generate 38.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beta Systems Software vs. Harmony Gold Mining
Performance |
| Timeline |
| Beta Systems Software |
| Harmony Gold Mining |
Beta Systems and Harmony Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beta Systems and Harmony Gold
The main advantage of trading using opposite Beta Systems and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beta Systems 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 effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Beta Systems as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Beta Systems' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Beta Systems' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Beta Systems Software.
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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