Correlation Between Rio Tinto and Harmony Gold
Can any of the company-specific risk be diversified away by investing in both Rio Tinto 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 Rio Tinto and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto PLC and Harmony Gold Mining, you can compare the effects of market volatilities on Rio Tinto 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 Rio Tinto with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Harmony Gold.
Diversification Opportunities for Rio Tinto and Harmony Gold
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rio and Harmony is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC 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 Rio Tinto 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 Rio Tinto PLC 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 Rio Tinto i.e., Rio Tinto and Harmony Gold go up and down completely randomly.
Pair Corralation between Rio Tinto and Harmony Gold
Assuming the 90 days trading horizon Rio Tinto PLC is expected to generate 0.45 times more return on investment than Harmony Gold. However, Rio Tinto PLC is 2.2 times less risky than Harmony Gold. It trades about -0.11 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.1 per unit of risk. If you would invest 911,000 in Rio Tinto PLC on September 12, 2024 and sell it today you would lose (37,000) from holding Rio Tinto PLC or give up 4.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Rio Tinto PLC vs. Harmony Gold Mining
Performance |
| Timeline |
| Rio Tinto PLC |
| Harmony Gold Mining |
Rio Tinto and Harmony Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Harmony Gold
The main advantage of trading using opposite Rio Tinto and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto 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.| Rio Tinto vs. United States Steel | Rio Tinto vs. Transportadora de Gas | Rio Tinto vs. Harmony Gold Mining | Rio Tinto vs. Agrometal SAI |
| Harmony Gold vs. Edesa Holding SA | Harmony Gold vs. Vista Energy, SAB | Harmony Gold vs. United States Steel | Harmony Gold vs. Pfizer Inc |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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