Correlation Between Caledonia MiningPlc and Morgan Advanced

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

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

Diversification Opportunities for Caledonia MiningPlc and Morgan Advanced

-0.65

Correlation Coefficient

Caledonia MiningPlc  Morgan Advanced

Excellent diversification

The 3 months correlation between Caledonia and Morgan is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials and Caledonia MiningPlc 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 Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of Caledonia MiningPlc i.e., Caledonia MiningPlc and Morgan Advanced go up and down completely randomly.

Pair Corralation between Caledonia MiningPlc and Morgan Advanced

Assuming the 90 days trading horizon Caledonia Mining is expected to generate 0.55 times more return on investment than Morgan Advanced. However, Caledonia Mining is 1.8 times less risky than Morgan Advanced. It trades about 0.2 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about -0.13 per unit of risk. If you would invest  77,500  in Caledonia Mining on December 30, 2024 and sell it today you would earn a total of  15,000  from holding Caledonia Mining or generate 19.35% 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.  Morgan Advanced Materials

Caledonia MiningPlc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Mining are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Caledonia MiningPlc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Morgan Advanced Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morgan Advanced Materials 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Caledonia MiningPlc and Morgan Advanced

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

The idea behind Caledonia Mining and Morgan Advanced Materials 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.