Correlation Between IAMGold and Harmony Gold
Can any of the company-specific risk be diversified away by investing in both IAMGold and Harmony Gold 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 IAMGold and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IAMGold and Harmony Gold Mining, you can compare the effects of market volatilities on IAMGold and Harmony Gold 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 IAMGold with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAMGold and Harmony Gold.
Diversification Opportunities for IAMGold and Harmony Gold
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IAMGold and Harmony is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding IAMGold and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining and IAMGold 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 IAMGold are associated (or correlated) with Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of IAMGold i.e., IAMGold and Harmony Gold go up and down completely randomly.
Pair Corralation between IAMGold and Harmony Gold
Considering the 90-day investment horizon IAMGold is expected to generate 1.03 times less return on investment than Harmony Gold. In addition to that, IAMGold is 1.07 times more volatile than Harmony Gold Mining. It trades about 0.07 of its total potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.08 per unit of volatility. If you would invest 342.00 in Harmony Gold Mining on August 28, 2024 and sell it today you would earn a total of 578.00 from holding Harmony Gold Mining or generate 169.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IAMGold vs. Harmony Gold Mining
Performance |
| Timeline |
| IAMGold |
| Harmony Gold Mining |
IAMGold and Harmony Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IAMGold and Harmony Gold
The main advantage of trading using opposite IAMGold and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAMGold position performs unexpectedly, Harmony Gold 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 Harmony Gold will offset losses from the drop in Harmony Gold's long position.The idea behind IAMGold and Harmony Gold Mining pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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