Correlation Between Harmony Gold and IAMGold
Can any of the company-specific risk be diversified away by investing in both Harmony Gold and IAMGold 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 IAMGold 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 IAMGold, you can compare the effects of market volatilities on Harmony Gold and IAMGold 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 IAMGold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and IAMGold.
Diversification Opportunities for Harmony Gold and IAMGold
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Harmony and IAMGold is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and IAMGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAMGold 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 IAMGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAMGold has no effect on the direction of Harmony Gold i.e., Harmony Gold and IAMGold go up and down completely randomly.
Pair Corralation between Harmony Gold and IAMGold
Considering the 90-day investment horizon Harmony Gold is expected to generate 1.1 times less return on investment than IAMGold. In addition to that, Harmony Gold is 1.03 times more volatile than IAMGold. It trades about 0.18 of its total potential returns per unit of risk. IAMGold is currently generating about 0.21 per unit of volatility. If you would invest 251.00 in IAMGold on January 25, 2024 and sell it today you would earn a total of 120.00 from holding IAMGold or generate 47.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harmony Gold Mining vs. IAMGold
Performance |
| Timeline |
| Harmony Gold Mining |
| IAMGold |
Harmony Gold and IAMGold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harmony Gold and IAMGold
The main advantage of trading using opposite Harmony Gold and IAMGold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harmony Gold position performs unexpectedly, IAMGold 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 IAMGold will offset losses from the drop in IAMGold's long position.The idea behind Harmony Gold Mining and IAMGold 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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