Correlation Between Caledonia Mining and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Caledonia Mining and Smithson Investment 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 Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Mining and Smithson Investment Trust, you can compare the effects of market volatilities on Caledonia Mining and Smithson Investment 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 Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Mining and Smithson Investment.
Diversification Opportunities for Caledonia Mining and Smithson Investment
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Caledonia and Smithson is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust 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 Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Smithson Investment go up and down completely randomly.
Pair Corralation between Caledonia Mining and Smithson Investment
Assuming the 90 days trading horizon Caledonia Mining is expected to under-perform the Smithson Investment. In addition to that, Caledonia Mining is 3.0 times more volatile than Smithson Investment Trust. It trades about -0.28 of its total potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.22 per unit of volatility. If you would invest 146,400 in Smithson Investment Trust on September 13, 2024 and sell it today you would earn a total of 5,600 from holding Smithson Investment Trust or generate 3.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caledonia Mining vs. Smithson Investment Trust
Performance |
| Timeline |
| Caledonia Mining |
| Smithson Investment Trust |
Caledonia Mining and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Mining and Smithson Investment
The main advantage of trading using opposite Caledonia Mining and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Mining position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Caledonia Mining vs. Allianz Technology Trust | Caledonia Mining vs. HCA Healthcare | Caledonia Mining vs. Worldwide Healthcare Trust | Caledonia Mining vs. Omega Healthcare Investors |
| Smithson Investment vs. Cizzle Biotechnology Holdings | Smithson Investment vs. Beazer Homes USA | Smithson Investment vs. Ecofin Global Utilities | Smithson Investment vs. Ryanair Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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