Correlation Between Iridium Communications and Harmony Gold
Can any of the company-specific risk be diversified away by investing in both Iridium Communications 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 Iridium Communications and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Harmony Gold Mining, you can compare the effects of market volatilities on Iridium Communications 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 Iridium Communications with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Harmony Gold.
Diversification Opportunities for Iridium Communications and Harmony Gold
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Iridium and Harmony is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications 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 Iridium Communications 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 Iridium Communications 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 Iridium Communications i.e., Iridium Communications and Harmony Gold go up and down completely randomly.
Pair Corralation between Iridium Communications and Harmony Gold
Given the investment horizon of 90 days Iridium Communications is expected to generate 0.52 times more return on investment than Harmony Gold. However, Iridium Communications is 1.91 times less risky than Harmony Gold. It trades about 0.04 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.21 per unit of risk. If you would invest 2,903 in Iridium Communications on August 26, 2024 and sell it today you would earn a total of 37.00 from holding Iridium Communications or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iridium Communications vs. Harmony Gold Mining
Performance |
| Timeline |
| Iridium Communications |
| Harmony Gold Mining |
Iridium Communications and Harmony Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Harmony Gold
The main advantage of trading using opposite Iridium Communications and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications 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 Iridium Communications 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.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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