Correlation Between Big Ridge and Capitan Mining

Can any of the company-specific risk be diversified away by investing in both Big Ridge and Capitan Mining 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 Big Ridge and Capitan Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Ridge Gold and Capitan Mining, you can compare the effects of market volatilities on Big Ridge and Capitan Mining 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 Big Ridge with a short position of Capitan Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Ridge and Capitan Mining.

Diversification Opportunities for Big Ridge and Capitan Mining

0.37

Correlation Coefficient

Big Ridge  Capitan Mining

Weak diversification

The 3 months correlation between Big and Capitan is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Big Ridge Gold and Capitan Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitan Mining and Big Ridge 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 Big Ridge Gold are associated (or correlated) with Capitan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitan Mining has no effect on the direction of Big Ridge i.e., Big Ridge and Capitan Mining go up and down completely randomly.

Pair Corralation between Big Ridge and Capitan Mining

Assuming the 90 days trading horizon Big Ridge Gold is expected to generate 0.9 times more return on investment than Capitan Mining. However, Big Ridge Gold is 1.11 times less risky than Capitan Mining. It trades about -0.1 of its potential returns per unit of risk. Capitan Mining is currently generating about -0.13 per unit of risk. If you would invest  10.00  in Big Ridge Gold on September 21, 2024 and sell it today you would lose (1.00) from holding Big Ridge Gold or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Big Ridge Gold  vs.  Capitan Mining

Big Ridge Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big Ridge Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Big Ridge may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Capitan Mining

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capitan Mining are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Capitan Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Ridge and Capitan Mining

The main advantage of trading using opposite Big Ridge and Capitan Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Ridge position performs unexpectedly, Capitan Mining 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 Capitan Mining will offset losses from the drop in Capitan Mining's long position.

The idea behind Big Ridge Gold and Capitan Mining pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .