Correlation Between Western Acquisition and Harmony Gold

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

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

Diversification Opportunities for Western Acquisition and Harmony Gold

-0.1

Correlation Coefficient

Western Acquisition  Harmony Gold

Good diversification

The 3 months correlation between Western and Harmony is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures 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 Western Acquisition 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 Western Acquisition Ventures 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 Western Acquisition i.e., Western Acquisition and Harmony Gold go up and down completely randomly.

Pair Corralation between Western Acquisition and Harmony Gold

Given the investment horizon of 90 days Western Acquisition Ventures is expected to generate 1.7 times more return on investment than Harmony Gold. However, Western Acquisition is 1.7 times more volatile than Harmony Gold Mining. It trades about 0.09 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about -0.01 per unit of risk. If you would invest  1,095  in Western Acquisition Ventures on July 23, 2024 and sell it today you would earn a total of  84.00  from holding Western Acquisition Ventures or generate 7.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

Western Acquisition Ventures  vs.  Harmony Gold Mining

Western Acquisition

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Western Acquisition may actually be approaching a critical reversion point that can send shares even higher in November 2024.

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. Despite nearly stable fundamental indicators, Harmony Gold is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Acquisition and Harmony Gold

The main advantage of trading using opposite Western Acquisition and Harmony Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Acquisition 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 Western Acquisition Ventures 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.