Can any of the company-specific risk be diversified away by investing in both Harmony Gold and Carlos Casado 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 Carlos Casado 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 Carlos Casado, you can compare the effects of market volatilities on Harmony Gold and Carlos Casado 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 Carlos Casado. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harmony Gold and Carlos Casado.
Diversification Opportunities for Harmony Gold and Carlos Casado
The 3 months correlation between Harmony and Carlos is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and Carlos Casado in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlos Casado 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 Carlos Casado. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlos Casado has no effect on the direction of Harmony Gold i.e., Harmony Gold and Carlos Casado go up and down completely randomly.
Pair Corralation between Harmony Gold and Carlos Casado
Assuming the 90 days trading horizon Harmony Gold is expected to generate 1.01 times less return on investment than Carlos Casado. In addition to that, Harmony Gold is 1.07 times more volatile than Carlos Casado. It trades about 0.19 of its total potential returns per unit of risk. Carlos Casado is currently generating about 0.21 per unit of volatility. If you would invest 5,000 in Carlos Casado on March 6, 2024 and sell it today you would earn a total of 51,850 from holding Carlos Casado or generate 1037.0% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Harmony Gold sustained solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in Carlos Casado are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Carlos Casado sustained solid returns over the last few months and may actually be approaching a breakup point.