Correlation Between Harmony Gold and Rio2
Can any of the company-specific risk be diversified away by investing in both Harmony Gold and Rio2 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 Rio2 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 Rio2 Limited, you can compare the effects of market volatilities on Harmony Gold and Rio2 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 Rio2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and Rio2.
Diversification Opportunities for Harmony Gold and Rio2
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Harmony and Rio2 is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Rio2 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio2 Limited 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 Rio2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio2 Limited has no effect on the direction of Harmony Gold i.e., Harmony Gold and Rio2 go up and down completely randomly.
Pair Corralation between Harmony Gold and Rio2
Considering the 90-day investment horizon Harmony Gold is expected to generate 1.4 times less return on investment than Rio2. But when comparing it to its historical volatility, Harmony Gold Mining is 1.53 times less risky than Rio2. It trades about 0.08 of its potential returns per unit of risk. Rio2 Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 15.00 in Rio2 Limited on September 3, 2024 and sell it today you would earn a total of 31.00 from holding Rio2 Limited or generate 206.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harmony Gold Mining vs. Rio2 Limited
Performance |
| Timeline |
| Harmony Gold Mining |
| Rio2 Limited |
Harmony Gold and Rio2 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harmony Gold and Rio2
The main advantage of trading using opposite Harmony Gold and Rio2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Rio2 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 Rio2 will offset losses from the drop in Rio2's long position.| Harmony Gold vs. AngloGold Ashanti plc | Harmony Gold vs. Eldorado Gold Corp | Harmony Gold vs. Kinross Gold | Harmony Gold vs. Pan American Silver |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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