Correlation Between Vale SA and Harmony Gold

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

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

Diversification Opportunities for Vale SA and Harmony Gold

-0.28

Correlation Coefficient

Vale SA  Harmony Gold

Very good diversification

The 3 months correlation between Vale and Harmony is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR 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 Vale SA 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 Vale SA ADR 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 Vale SA i.e., Vale SA and Harmony Gold go up and down completely randomly.

Pair Corralation between Vale SA and Harmony Gold

Given the investment horizon of 90 days Vale SA ADR is expected to generate 0.53 times more return on investment than Harmony Gold. However, Vale SA ADR is 1.88 times less risky than Harmony Gold. It trades about 0.05 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.06 per unit of risk. If you would invest  931.00  in Vale SA ADR on May 5, 2025 and sell it today you would earn a total of  40.00  from holding Vale SA ADR or generate 4.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Vale SA ADR  vs.  Harmony Gold Mining

Vale SA ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Vale SA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Harmony Gold Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harmony Gold Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vale SA and Harmony Gold

The main advantage of trading using opposite Vale SA and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA 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 Vale SA ADR 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.