Correlation Between Caledonia Mining and Independence Gold

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

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

Diversification Opportunities for Caledonia Mining and Independence Gold

0.5

Correlation Coefficient

Caledonia Mining  Independence Gold

Very weak diversification

The 3 months correlation between Caledonia and Independence is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Independence Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independence Gold Corp 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 Independence Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independence Gold Corp has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Independence Gold go up and down completely randomly.

Pair Corralation between Caledonia Mining and Independence Gold

Given the investment horizon of 90 days Caledonia Mining is expected to under-perform the Independence Gold. But the stock apears to be less risky and, when comparing its historical volatility, Caledonia Mining is 1.89 times less risky than Independence Gold. The stock trades about -0.08 of its potential returns per unit of risk. The Independence Gold Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Independence Gold Corp on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Independence Gold Corp or generate 0.0% return on investment over 90 days.

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

Caledonia Mining  vs.  Independence Gold Corp

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. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Independence Gold Corp

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Independence Gold Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Independence Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Caledonia Mining and Independence Gold

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

The idea behind Caledonia Mining and Independence Gold Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.