Correlation Between Caledonia Mining and Capital Metals
Can any of the company-specific risk be diversified away by investing in both Caledonia Mining and Capital Metals 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 Mining and Capital Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Mining and Capital Metals PLC, you can compare the effects of market volatilities on Caledonia Mining and Capital Metals 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 Mining with a short position of Capital Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Mining and Capital Metals.
Diversification Opportunities for Caledonia Mining and Capital Metals
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caledonia and Capital is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Capital Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Metals PLC and Caledonia Mining 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 Mining are associated (or correlated) with Capital Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Metals PLC has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Capital Metals go up and down completely randomly.
Pair Corralation between Caledonia Mining and Capital Metals
Assuming the 90 days trading horizon Caledonia Mining is expected to under-perform the Capital Metals. But the stock apears to be less risky and, when comparing its historical volatility, Caledonia Mining is 1.58 times less risky than Capital Metals. The stock trades about -0.43 of its potential returns per unit of risk. The Capital Metals PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 185.00 in Capital Metals PLC on September 4, 2024 and sell it today you would earn a total of 0.00 from holding Capital Metals PLC or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Mining vs. Capital Metals PLC
Performance |
| Timeline |
| Caledonia Mining |
| Capital Metals PLC |
Caledonia Mining and Capital Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Mining and Capital Metals
The main advantage of trading using opposite Caledonia Mining and Capital Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Mining position performs unexpectedly, Capital Metals 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 Capital Metals will offset losses from the drop in Capital Metals' long position.| Caledonia Mining vs. Givaudan SA | Caledonia Mining vs. Antofagasta PLC | Caledonia Mining vs. Atalaya Mining | Caledonia Mining vs. Ferrexpo PLC |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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