Correlation Between Capital Drilling and GoldMining

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

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

Diversification Opportunities for Capital Drilling and GoldMining

0.54

Correlation Coefficient

Capital Drilling  GoldMining

Very weak diversification

The 3 months correlation between Capital and GoldMining is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Capital Drilling and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining and Capital Drilling 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 Capital Drilling are associated (or correlated) with GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Capital Drilling i.e., Capital Drilling and GoldMining go up and down completely randomly.

Pair Corralation between Capital Drilling and GoldMining

Assuming the 90 days trading horizon Capital Drilling is expected to under-perform the GoldMining. But the stock apears to be less risky and, when comparing its historical volatility, Capital Drilling is 1.62 times less risky than GoldMining. The stock trades about -0.05 of its potential returns per unit of risk. The GoldMining is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  127.00  in GoldMining on September 1, 2024 and sell it today you would lose (7.00) from holding GoldMining or give up 5.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	51.16%
Values	Daily Returns

Capital Drilling  vs.  GoldMining

Capital Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Drilling is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

GoldMining

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoldMining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GoldMining is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Capital Drilling and GoldMining

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

The idea behind Capital Drilling and GoldMining 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.