Correlation Between Harmony Gold and China Eastern

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

Diversification Opportunities for Harmony Gold and China Eastern

-0.62

Correlation Coefficient

Harmony Gold  China Eastern

Excellent diversification

The 3 months correlation between Harmony and China is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Harmony Gold Mining and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines 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 China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of Harmony Gold i.e., Harmony Gold and China Eastern go up and down completely randomly.

Pair Corralation between Harmony Gold and China Eastern

Assuming the 90 days horizon Harmony Gold Mining is expected to under-perform the China Eastern. But the stock apears to be less risky and, when comparing its historical volatility, Harmony Gold Mining is 1.01 times less risky than China Eastern. The stock trades about 0.0 of its potential returns per unit of risk. The China Eastern Airlines is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  26.00  in China Eastern Airlines on April 25, 2025 and sell it today you would earn a total of  4.00  from holding China Eastern Airlines or generate 15.38% return on investment over 90 days.

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

Harmony Gold Mining  vs.  China Eastern Airlines

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

China Eastern Airlines

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Eastern Airlines are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Eastern reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harmony Gold and China Eastern

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

The idea behind Harmony Gold Mining and China Eastern Airlines 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.