Correlation Between Evolution Mining and Capricorn Metals
Can any of the company-specific risk be diversified away by investing in both Evolution Mining and Capricorn 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 Evolution Mining and Capricorn Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evolution Mining and Capricorn Metals, you can compare the effects of market volatilities on Evolution Mining and Capricorn 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 Evolution Mining with a short position of Capricorn Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Mining and Capricorn Metals.
Diversification Opportunities for Evolution Mining and Capricorn Metals
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Evolution and Capricorn is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining and Capricorn Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricorn Metals and Evolution 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 Evolution Mining are associated (or correlated) with Capricorn Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricorn Metals has no effect on the direction of Evolution Mining i.e., Evolution Mining and Capricorn Metals go up and down completely randomly.
Pair Corralation between Evolution Mining and Capricorn Metals
Assuming the 90 days trading horizon Evolution Mining is expected to under-perform the Capricorn Metals. But the stock apears to be less risky and, when comparing its historical volatility, Evolution Mining is 1.12 times less risky than Capricorn Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Capricorn Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 650.00 in Capricorn Metals on September 2, 2024 and sell it today you would lose (1.00) from holding Capricorn Metals or give up 0.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evolution Mining vs. Capricorn Metals
Performance |
| Timeline |
| Evolution Mining |
| Capricorn Metals |
Evolution Mining and Capricorn Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evolution Mining and Capricorn Metals
The main advantage of trading using opposite Evolution Mining and Capricorn Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolution Mining position performs unexpectedly, Capricorn 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 Capricorn Metals will offset losses from the drop in Capricorn Metals' long position.| Evolution Mining vs. Hutchison Telecommunications | Evolution Mining vs. Red Hill Iron | Evolution Mining vs. Legacy Iron Ore | Evolution Mining vs. Autosports Group |
| Capricorn Metals vs. Retail Food Group | Capricorn Metals vs. G8 Education | Capricorn Metals vs. Step One Clothing | Capricorn Metals vs. Carnegie Clean Energy |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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