Correlation Between Harmony Gold and Vale SA
Can any of the company-specific risk be diversified away by investing in both Harmony Gold and Vale SA 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 Vale SA 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 Vale SA, you can compare the effects of market volatilities on Harmony Gold and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and Vale SA.
Diversification Opportunities for Harmony Gold and Vale SA
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Harmony and Vale is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Harmony Gold i.e., Harmony Gold and Vale SA go up and down completely randomly.
Pair Corralation between Harmony Gold and Vale SA
Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.69 times more return on investment than Vale SA. However, Harmony Gold is 1.69 times more volatile than Vale SA. It trades about 0.07 of its potential returns per unit of risk. Vale SA is currently generating about -0.03 per unit of risk. If you would invest 317.00 in Harmony Gold Mining on September 24, 2024 and sell it today you would earn a total of 473.00 from holding Harmony Gold Mining or generate 149.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harmony Gold Mining vs. Vale SA
Performance |
| Timeline |
| Harmony Gold Mining |
| Vale SA |
Harmony Gold and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harmony Gold and Vale SA
The main advantage of trading using opposite Harmony Gold and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.| Harmony Gold vs. ZIJIN MINH UNSPADR20 | Harmony Gold vs. Newmont | Harmony Gold vs. Barrick Gold | Harmony Gold vs. Franco Nevada |
| Vale SA vs. AIR LIQUIDE ADR | Vale SA vs. SYSTEMAIR AB | Vale SA vs. SEALED AIR | Vale SA vs. Harmony Gold Mining |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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