Correlation Between Caledonia Investments and Baker Steel
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments and Baker Steel 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 Caledonia Investments and Baker Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and Baker Steel Resources, you can compare the effects of market volatilities on Caledonia Investments and Baker Steel 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 Caledonia Investments with a short position of Baker Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and Baker Steel.
Diversification Opportunities for Caledonia Investments and Baker Steel
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caledonia and Baker is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources and Caledonia Investments 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 Caledonia Investments are associated (or correlated) with Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of Caledonia Investments i.e., Caledonia Investments and Baker Steel go up and down completely randomly.
Pair Corralation between Caledonia Investments and Baker Steel
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 5.75 times less return on investment than Baker Steel. But when comparing it to its historical volatility, Caledonia Investments is 3.45 times less risky than Baker Steel. It trades about 0.02 of its potential returns per unit of risk. Baker Steel Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,500 in Baker Steel Resources on October 12, 2024 and sell it today you would earn a total of 1,250 from holding Baker Steel Resources or generate 27.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.75% |
| Values | Daily Returns |
Caledonia Investments vs. Baker Steel Resources
Performance |
| Timeline |
| Caledonia Investments |
| Baker Steel Resources |
Caledonia Investments and Baker Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and Baker Steel
The main advantage of trading using opposite Caledonia Investments and Baker Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments position performs unexpectedly, Baker Steel 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 Baker Steel will offset losses from the drop in Baker Steel's long position.| Caledonia Investments vs. Baker Steel Resources | Caledonia Investments vs. Cizzle Biotechnology Holdings | Caledonia Investments vs. Aberdeen Diversified Income | Caledonia Investments vs. Iron Mountain |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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