Correlation Between Caledonia Mining and Tanzanian Royalty
Can any of the company-specific risk be diversified away by investing in both Caledonia Mining and Tanzanian Royalty 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 Tanzanian Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caledonia Mining and Tanzanian Royalty Exploration, you can compare the effects of market volatilities on Caledonia Mining and Tanzanian Royalty 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 Tanzanian Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Mining and Tanzanian Royalty.
Diversification Opportunities for Caledonia Mining and Tanzanian Royalty
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Caledonia and Tanzanian is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Tanzanian Royalty Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanzanian Royalty 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 Tanzanian Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanzanian Royalty has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Tanzanian Royalty go up and down completely randomly.
Pair Corralation between Caledonia Mining and Tanzanian Royalty
Given the investment horizon of 90 days Caledonia Mining is expected to generate 1.01 times more return on investment than Tanzanian Royalty. However, Caledonia Mining is 1.01 times more volatile than Tanzanian Royalty Exploration. It trades about 0.02 of its potential returns per unit of risk. Tanzanian Royalty Exploration is currently generating about 0.01 per unit of risk. If you would invest 1,068 in Caledonia Mining on August 26, 2024 and sell it today you would earn a total of 5.00 from holding Caledonia Mining or generate 0.47% 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. Tanzanian Royalty Exploration
Performance |
| Timeline |
| Caledonia Mining |
| Tanzanian Royalty |
Caledonia Mining and Tanzanian Royalty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caledonia Mining and Tanzanian Royalty
The main advantage of trading using opposite Caledonia Mining and Tanzanian Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caledonia Mining position performs unexpectedly, Tanzanian Royalty 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 Tanzanian Royalty will offset losses from the drop in Tanzanian Royalty's long position.| Caledonia Mining vs. DRDGOLD Limited ADR | Caledonia Mining vs. Galiano Gold | Caledonia Mining vs. Mastech Holdings | Caledonia Mining vs. EMX Royalty Corp |
| Tanzanian Royalty vs. Fortitude Gold Corp | Tanzanian Royalty vs. Galiano Gold | Tanzanian Royalty vs. GoldMining |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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