Correlation Between Capitan Mining and Murchison Minerals

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

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

Diversification Opportunities for Capitan Mining and Murchison Minerals

-0.41

Correlation Coefficient

Capitan Mining  Murchison Minerals

Very good diversification

The 3 months correlation between Capitan and Murchison is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Capitan Mining and Murchison Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murchison Minerals and Capitan 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 Capitan Mining are associated (or correlated) with Murchison Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murchison Minerals has no effect on the direction of Capitan Mining i.e., Capitan Mining and Murchison Minerals go up and down completely randomly.

Pair Corralation between Capitan Mining and Murchison Minerals

Assuming the 90 days trading horizon Capitan Mining is expected to under-perform the Murchison Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Capitan Mining is 4.18 times less risky than Murchison Minerals. The stock trades about -0.13 of its potential returns per unit of risk. The Murchison Minerals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Murchison Minerals on September 21, 2024 and sell it today you would earn a total of  0.00  from holding Murchison Minerals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Capitan Mining  vs.  Murchison Minerals

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.

Murchison Minerals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Murchison Minerals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Murchison Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capitan Mining and Murchison Minerals

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

The idea behind Capitan Mining and Murchison Minerals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.