Correlation Between Harmony Gold and Lithia Motors
Can any of the company-specific risk be diversified away by investing in both Harmony Gold and Lithia Motors 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 Lithia Motors 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 Lithia Motors, you can compare the effects of market volatilities on Harmony Gold and Lithia Motors 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 Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and Lithia Motors.
Diversification Opportunities for Harmony Gold and Lithia Motors
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Harmony and Lithia is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors 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 Lithia Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithia Motors has no effect on the direction of Harmony Gold i.e., Harmony Gold and Lithia Motors go up and down completely randomly.
Pair Corralation between Harmony Gold and Lithia Motors
Assuming the 90 days horizon Harmony Gold Mining is expected to generate 1.41 times more return on investment than Lithia Motors. However, Harmony Gold is 1.41 times more volatile than Lithia Motors. It trades about 0.07 of its potential returns per unit of risk. Lithia Motors is currently generating about 0.08 per unit of risk. If you would invest 541.00 in Harmony Gold Mining on September 4, 2024 and sell it today you would earn a total of 309.00 from holding Harmony Gold Mining or generate 57.12% 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. Lithia Motors
Performance |
| Timeline |
| Harmony Gold Mining |
| Lithia Motors |
Harmony Gold and Lithia Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harmony Gold and Lithia Motors
The main advantage of trading using opposite Harmony Gold and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Lithia Motors 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 Lithia Motors will offset losses from the drop in Lithia Motors' long position.| Harmony Gold vs. ZIJIN MINH UNSPADR20 | Harmony Gold vs. Barrick Gold | Harmony Gold vs. Superior Plus Corp | Harmony Gold vs. NMI Holdings |
| Lithia Motors vs. Chongqing Machinery Electric | Lithia Motors vs. EPSILON HEALTHCARE LTD | Lithia Motors vs. Harmony Gold Mining | Lithia Motors vs. Cardinal Health |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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