Correlation Between Caledonia Mining and Ironveld Plc

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

By analyzing existing cross correlation between Caledonia Mining and Ironveld Plc, you can compare the effects of market volatilities on Caledonia Mining and Ironveld Plc 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 Ironveld Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Mining and Ironveld Plc.

Diversification Opportunities for Caledonia Mining and Ironveld Plc

-0.04

Correlation Coefficient

Caledonia Mining  Ironveld Plc

Good diversification

The 3 months correlation between Caledonia and Ironveld is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Ironveld Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironveld Plc 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 Ironveld Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironveld Plc has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Ironveld Plc go up and down completely randomly.

Pair Corralation between Caledonia Mining and Ironveld Plc

Assuming the 90 days trading horizon Caledonia Mining is expected to under-perform the Ironveld Plc. In addition to that, Caledonia Mining is 2.44 times more volatile than Ironveld Plc. It trades about -0.35 of its total potential returns per unit of risk. Ironveld Plc is currently generating about 0.26 per unit of volatility. If you would invest  3.75  in Ironveld Plc on October 12, 2024 and sell it today you would earn a total of  0.10  from holding Ironveld Plc or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Caledonia Mining  vs.  Ironveld Plc

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ironveld Plc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Ironveld Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ironveld Plc 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 Caledonia Mining and Ironveld Plc

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

The idea behind Caledonia Mining and Ironveld Plc 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.