Correlation Between Harmony Gold and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Harmony Gold and MercadoLibre 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 MercadoLibre 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 MercadoLibre, you can compare the effects of market volatilities on Harmony Gold and MercadoLibre 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 MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and MercadoLibre.
Diversification Opportunities for Harmony Gold and MercadoLibre
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Harmony and MercadoLibre is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre 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 MercadoLibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MercadoLibre has no effect on the direction of Harmony Gold i.e., Harmony Gold and MercadoLibre go up and down completely randomly.
Pair Corralation between Harmony Gold and MercadoLibre
Assuming the 90 days trading horizon Harmony Gold Mining is expected to under-perform the MercadoLibre. In addition to that, Harmony Gold is 1.17 times more volatile than MercadoLibre. It trades about -0.1 of its total potential returns per unit of risk. MercadoLibre is currently generating about -0.02 per unit of volatility. If you would invest 1,767,500 in MercadoLibre on September 19, 2024 and sell it today you would lose (25,000) from holding MercadoLibre or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harmony Gold Mining vs. MercadoLibre
Performance |
| Timeline |
| Harmony Gold Mining |
| MercadoLibre |
Harmony Gold and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harmony Gold and MercadoLibre
The main advantage of trading using opposite Harmony Gold and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, MercadoLibre 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 MercadoLibre will offset losses from the drop in MercadoLibre's long position.| Harmony Gold vs. Telecom Argentina | Harmony Gold vs. Agrometal SAI | Harmony Gold vs. Transportadora de Gas | Harmony Gold vs. Compania de Transporte |
| MercadoLibre vs. Harmony Gold Mining | MercadoLibre vs. Agrometal SAI | MercadoLibre vs. Telecom Argentina | MercadoLibre vs. Compania de Transporte |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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