Correlation Between Harmony Gold and Bank of America
Can any of the company-specific risk be diversified away by investing in both Harmony Gold and Bank of America 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 Bank of America 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 Verizon Communications, you can compare the effects of market volatilities on Harmony Gold and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and Bank of America.
Diversification Opportunities for Harmony Gold and Bank of America
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Harmony and Bank is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Harmony Gold i.e., Harmony Gold and Bank of America go up and down completely randomly.
Pair Corralation between Harmony Gold and Bank of America
Assuming the 90 days horizon Harmony Gold is expected to generate 1.3 times less return on investment than Bank of America. In addition to that, Harmony Gold is 2.78 times more volatile than Verizon Communications. It trades about 0.03 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.1 per unit of volatility. If you would invest 3,509 in Verizon Communications on September 3, 2024 and sell it today you would earn a total of 691.00 from holding Verizon Communications or generate 19.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harmony Gold Mining vs. Verizon Communications
Performance |
| Timeline |
| Harmony Gold Mining |
| Verizon Communications |
Harmony Gold and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harmony Gold and Bank of America
The main advantage of trading using opposite Harmony Gold and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Harmony Gold vs. ZIJIN MINH UNSPADR20 | Harmony Gold vs. Barrick Gold | Harmony Gold vs. Superior Plus Corp | Harmony Gold vs. NMI Holdings |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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