Correlation Between Central Asia and Caledonia Mining
Can any of the company-specific risk be diversified away by investing in both Central Asia and Caledonia Mining 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 Central Asia and Caledonia Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Asia Metals and Caledonia Mining, you can compare the effects of market volatilities on Central Asia and Caledonia Mining 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 Central Asia with a short position of Caledonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and Caledonia Mining.
Diversification Opportunities for Central Asia and Caledonia Mining
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Central and Caledonia is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining and Central Asia 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 Central Asia Metals are associated (or correlated) with Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Central Asia i.e., Central Asia and Caledonia Mining go up and down completely randomly.
Pair Corralation between Central Asia and Caledonia Mining
Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the Caledonia Mining. In addition to that, Central Asia is 1.43 times more volatile than Caledonia Mining. It trades about -0.13 of its total potential returns per unit of risk. Caledonia Mining is currently generating about -0.03 per unit of volatility. If you would invest 78,000 in Caledonia Mining on November 3, 2024 and sell it today you would lose (750.00) from holding Caledonia Mining or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Asia Metals vs. Caledonia Mining
Performance |
| Timeline |
| Central Asia Metals |
| Caledonia Mining |
Central Asia and Caledonia Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Asia and Caledonia Mining
The main advantage of trading using opposite Central Asia and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Asia position performs unexpectedly, Caledonia Mining 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 Mining will offset losses from the drop in Caledonia Mining's long position.| Central Asia vs. Endeavour Mining Corp | Central Asia vs. Silver Bullet Data | Central Asia vs. Europa Metals | Central Asia vs. CNH Industrial NV |
| Caledonia Mining vs. AMG Advanced Metallurgical | Caledonia Mining vs. First Class Metals | Caledonia Mining vs. Silvercorp Metals | Caledonia Mining vs. Science in Sport |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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