Correlation Between Harmony Gold and Meituan
Can any of the company-specific risk be diversified away by investing in both Harmony Gold and Meituan 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 Meituan 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 Meituan, you can compare the effects of market volatilities on Harmony Gold and Meituan 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 Meituan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and Meituan.
Diversification Opportunities for Harmony Gold and Meituan
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Harmony and Meituan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan 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 Meituan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan has no effect on the direction of Harmony Gold i.e., Harmony Gold and Meituan go up and down completely randomly.
Pair Corralation between Harmony Gold and Meituan
Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the Meituan. But the stock apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 1.02 times less risky than Meituan. The stock trades about -0.18 of its potential returns per unit of risk. The Meituan is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 2,203 in Meituan on September 2, 2024 and sell it today you would lose (283.00) from holding Meituan or give up 12.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harmony Gold Mining vs. Meituan
Performance |
| Timeline |
| Harmony Gold Mining |
| Meituan |
Harmony Gold and Meituan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harmony Gold and Meituan
The main advantage of trading using opposite Harmony Gold and Meituan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Meituan 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 Meituan will offset losses from the drop in Meituan's long position.| Harmony Gold vs. ZIJIN MINH UNSPADR20 | Harmony Gold vs. Superior Plus Corp | Harmony Gold vs. NMI Holdings | Harmony Gold vs. Origin Agritech |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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