Correlation Between Caledonia Investments and River
Can any of the company-specific risk be diversified away by investing in both Caledonia Investments and River 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 River into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Investments and River and Mercantile, you can compare the effects of market volatilities on Caledonia Investments and River 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 River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Investments and River.
Diversification Opportunities for Caledonia Investments and River
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Caledonia and River is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Investments and River and Mercantile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on River and Mercantile 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 River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of River and Mercantile has no effect on the direction of Caledonia Investments i.e., Caledonia Investments and River go up and down completely randomly.
Pair Corralation between Caledonia Investments and River
Assuming the 90 days trading horizon Caledonia Investments is expected to generate 0.72 times more return on investment than River. However, Caledonia Investments is 1.38 times less risky than River. It trades about 0.06 of its potential returns per unit of risk. River and Mercantile is currently generating about 0.04 per unit of risk. If you would invest 330,135 in Caledonia Investments on November 3, 2024 and sell it today you would earn a total of 49,365 from holding Caledonia Investments or generate 14.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Investments vs. River and Mercantile
Performance |
| Timeline |
| Caledonia Investments |
| River and Mercantile |
Caledonia Investments and River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Investments and River
The main advantage of trading using opposite Caledonia Investments and River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Investments position performs unexpectedly, River 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 River will offset losses from the drop in River's long position.| Caledonia Investments vs. Cornish Metals | Caledonia Investments vs. GreenX Metals | Caledonia Investments vs. European Metals Holdings | Caledonia Investments vs. Ryanair Holdings plc |
| River vs. Fidelity National Information | River vs. Datalogic | River vs. Creo Medical Group | River vs. Advanced Medical Solutions |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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