Correlation Between Harmony Gold and Highway Holdings

Can any of the company-specific risk be diversified away by investing in both Harmony Gold and Highway Holdings 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 Highway Holdings 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 Highway Holdings Limited, you can compare the effects of market volatilities on Harmony Gold and Highway Holdings 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 Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and Highway Holdings.

Diversification Opportunities for Harmony Gold and Highway Holdings

-0.58

Correlation Coefficient

Harmony Gold  Highway Holdings

Excellent diversification

The 3 months correlation between Harmony and Highway is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings 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 Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of Harmony Gold i.e., Harmony Gold and Highway Holdings go up and down completely randomly.

Pair Corralation between Harmony Gold and Highway Holdings

Assuming the 90 days horizon Harmony Gold Mining is expected to generate 2.7 times more return on investment than Highway Holdings. However, Harmony Gold is 2.7 times more volatile than Highway Holdings Limited. It trades about 0.18 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.01 per unit of risk. If you would invest  464.00  in Harmony Gold Mining on January 7, 2025 and sell it today you would earn a total of  936.00  from holding Harmony Gold Mining or generate 201.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	20.28%
Values	Daily Returns

Harmony Gold Mining  vs.  Highway Holdings Limited

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 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Highway Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highway Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Harmony Gold and Highway Holdings

The main advantage of trading using opposite Harmony Gold and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, Highway Holdings 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 Highway Holdings will offset losses from the drop in Highway Holdings' long position.

The idea behind Harmony Gold Mining and Highway Holdings Limited 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.