Correlation Between Barrick Gold and Harmony Gold

Can any of the company-specific risk be diversified away by investing in both Barrick Gold 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 Barrick Gold and Harmony Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barrick Gold and Harmony Gold Mining, you can compare the effects of market volatilities on Barrick Gold 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 Barrick Gold with a short position of Harmony Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barrick Gold and Harmony Gold.

Diversification Opportunities for Barrick Gold and Harmony Gold

0.59

Correlation Coefficient

Barrick Gold  Harmony Gold

Very weak diversification

The 3 months correlation between Barrick and Harmony is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Barrick Gold 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 Barrick 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 Barrick Gold 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 Barrick Gold i.e., Barrick Gold and Harmony Gold go up and down completely randomly.

Pair Corralation between Barrick Gold and Harmony Gold

Assuming the 90 days horizon Barrick Gold is expected to generate 6.19 times less return on investment than Harmony Gold. But when comparing it to its historical volatility, Barrick Gold is 1.82 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 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,091  in Harmony Gold Mining on January 13, 2025 and sell it today you would earn a total of  459.00  from holding Harmony Gold Mining or generate 42.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Barrick Gold  vs.  Harmony Gold Mining

Barrick Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barrick Gold are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Barrick Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Harmony Gold Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barrick Gold and Harmony Gold

The main advantage of trading using opposite Barrick Gold and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barrick Gold 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 Barrick Gold 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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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.