Correlation Between Cars and Harmony Gold
Can any of the company-specific risk be diversified away by investing in both Cars 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 Cars and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Harmony Gold Mining, you can compare the effects of market volatilities on Cars 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 Cars with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Harmony Gold.
Diversification Opportunities for Cars and Harmony Gold
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cars and Harmony is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc 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 Cars 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 Cars Inc 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 Cars i.e., Cars and Harmony Gold go up and down completely randomly.
Pair Corralation between Cars and Harmony Gold
Given the investment horizon of 90 days Cars Inc is expected to generate 0.57 times more return on investment than Harmony Gold. However, Cars Inc is 1.75 times less risky than Harmony Gold. It trades about -0.26 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.23 per unit of risk. If you would invest 1,834 in Cars Inc on October 14, 2024 and sell it today you would lose (151.00) from holding Cars Inc or give up 8.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Harmony Gold Mining
Performance |
| Timeline |
| Cars Inc |
| Harmony Gold Mining |
Cars and Harmony Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Harmony Gold
The main advantage of trading using opposite Cars and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars 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 idea behind Cars Inc and Harmony Gold Mining 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.| Harmony Gold vs. Vodka Brands Corp | Harmony Gold vs. Universal Stainless Alloy | Harmony Gold vs. Nippon Steel Corp | Harmony Gold vs. Safety Shot |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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