Correlation Between Caledonia Mining and Erste Group

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

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

Diversification Opportunities for Caledonia Mining and Erste Group

-0.72

Correlation Coefficient

Caledonia Mining  Erste Group

Pay attention - limited upside

The 3 months correlation between Caledonia and Erste is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank and Caledonia 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 Caledonia Mining are associated (or correlated) with Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Erste Group go up and down completely randomly.

Pair Corralation between Caledonia Mining and Erste Group

Assuming the 90 days trading horizon Caledonia Mining is expected to under-perform the Erste Group. In addition to that, Caledonia Mining is 1.53 times more volatile than Erste Group Bank. It trades about -0.24 of its total potential returns per unit of risk. Erste Group Bank is currently generating about 0.51 per unit of volatility. If you would invest  5,199  in Erste Group Bank on September 27, 2024 and sell it today you would earn a total of  685.00  from holding Erste Group Bank or generate 13.18% return on investment over 90 days.

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

Caledonia Mining  vs.  Erste Group Bank

Caledonia Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caledonia Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Erste Group Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caledonia Mining and Erste Group

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

The idea behind Caledonia Mining and Erste Group Bank 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.