Correlation Between Chalice Mining and Caterpillar

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

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

Diversification Opportunities for Chalice Mining and Caterpillar

-0.38

Correlation Coefficient

Chalice Mining  Caterpillar

Very good diversification

The 3 months correlation between Chalice and Caterpillar is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Chalice Mining Limited and Caterpillar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caterpillar and Chalice 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 Chalice Mining Limited are associated (or correlated) with Caterpillar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caterpillar has no effect on the direction of Chalice Mining i.e., Chalice Mining and Caterpillar go up and down completely randomly.

Pair Corralation between Chalice Mining and Caterpillar

Assuming the 90 days horizon Chalice Mining Limited is expected to generate 5.13 times more return on investment than Caterpillar. However, Chalice Mining is 5.13 times more volatile than Caterpillar. It trades about 0.09 of its potential returns per unit of risk. Caterpillar is currently generating about -0.08 per unit of risk. If you would invest  64.00  in Chalice Mining Limited on December 30, 2024 and sell it today you would earn a total of  21.00  from holding Chalice Mining Limited or generate 32.81% return on investment over 90 days.

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

Chalice Mining Limited  vs.  Caterpillar

Chalice Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chalice Mining Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Chalice Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Caterpillar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Chalice Mining and Caterpillar

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

The idea behind Chalice Mining Limited and Caterpillar 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.