Correlation Between Pan American and Caledonia Investments
Can any of the company-specific risk be diversified away by investing in both Pan American and Caledonia Investments 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 Pan American and Caledonia Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan American Silver and Caledonia Investments, you can compare the effects of market volatilities on Pan American and Caledonia Investments 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 Pan American with a short position of Caledonia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and Caledonia Investments.
Diversification Opportunities for Pan American and Caledonia Investments
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pan and Caledonia is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and Caledonia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Investments and Pan American 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 Pan American Silver are associated (or correlated) with Caledonia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Investments has no effect on the direction of Pan American i.e., Pan American and Caledonia Investments go up and down completely randomly.
Pair Corralation between Pan American and Caledonia Investments
Assuming the 90 days trading horizon Pan American Silver is expected to under-perform the Caledonia Investments. In addition to that, Pan American is 2.18 times more volatile than Caledonia Investments. It trades about -0.09 of its total potential returns per unit of risk. Caledonia Investments is currently generating about 0.22 per unit of volatility. If you would invest 350,500 in Caledonia Investments on October 20, 2024 and sell it today you would earn a total of 14,500 from holding Caledonia Investments or generate 4.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.0% |
| Values | Daily Returns |
Pan American Silver vs. Caledonia Investments
Performance |
| Timeline |
| Pan American Silver |
| Caledonia Investments |
Pan American and Caledonia Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan American and Caledonia Investments
The main advantage of trading using opposite Pan American and Caledonia Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan American position performs unexpectedly, Caledonia Investments 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 Caledonia Investments will offset losses from the drop in Caledonia Investments' long position.| Pan American vs. Ecclesiastical Insurance Office | Pan American vs. Tata Steel Limited | Pan American vs. Fortune Brands Home | Pan American vs. Waste Management |
| Caledonia Investments vs. Bioventix | Caledonia Investments vs. VeriSign | Caledonia Investments vs. Games Workshop Group | Caledonia Investments vs. AJ Bell plc |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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