Correlation Between Harmony Gold and AngloGold Ashanti

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

Diversification Opportunities for Harmony Gold and AngloGold Ashanti

0.61

Correlation Coefficient

Harmony Gold  AngloGold Ashanti

Poor diversification

The 3 months correlation between Harmony and AngloGold is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and AngloGold Ashanti plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AngloGold Ashanti plc 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 AngloGold Ashanti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AngloGold Ashanti plc has no effect on the direction of Harmony Gold i.e., Harmony Gold and AngloGold Ashanti go up and down completely randomly.

Pair Corralation between Harmony Gold and AngloGold Ashanti

Considering the 90-day investment horizon Harmony Gold Mining is expected to generate 1.43 times more return on investment than AngloGold Ashanti. However, Harmony Gold is 1.43 times more volatile than AngloGold Ashanti plc. It trades about -0.02 of its potential returns per unit of risk. AngloGold Ashanti plc is currently generating about -0.09 per unit of risk. If you would invest  1,016  in Harmony Gold Mining on August 28, 2024 and sell it today you would lose (96.00) from holding Harmony Gold Mining or give up 9.45% of portfolio value over 90 days.

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

Harmony Gold Mining  vs.  AngloGold Ashanti plc

Harmony Gold Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmony Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Harmony Gold is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

AngloGold Ashanti plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AngloGold Ashanti plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Harmony Gold and AngloGold Ashanti

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

The idea behind Harmony Gold Mining and AngloGold Ashanti plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.