Correlation Between Caledonia Mining and Maple Gold

Can any of the company-specific risk be diversified away by investing in both Caledonia Mining and Maple 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 Maple 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 Maple Gold Mines, you can compare the effects of market volatilities on Caledonia Mining and Maple 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 Maple Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caledonia Mining and Maple Gold.

Diversification Opportunities for Caledonia Mining and Maple Gold

0.39

Correlation Coefficient

Caledonia Mining  Maple Gold

Weak diversification

The 3 months correlation between Caledonia and Maple is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Maple Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Gold Mines 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 Maple Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Gold Mines has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Maple Gold go up and down completely randomly.

Pair Corralation between Caledonia Mining and Maple Gold

Given the investment horizon of 90 days Caledonia Mining is expected to under-perform the Maple Gold. But the stock apears to be less risky and, when comparing its historical volatility, Caledonia Mining is 2.94 times less risky than Maple Gold. The stock trades about -0.04 of its potential returns per unit of risk. The Maple Gold Mines is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3.60  in Maple Gold Mines on November 20, 2024 and sell it today you would earn a total of  1.40  from holding Maple Gold Mines or generate 38.89% return on investment over 90 days.

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

Caledonia Mining  vs.  Maple Gold Mines

Caledonia Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caledonia Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Caledonia Mining is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Maple Gold Mines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maple Gold Mines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Maple Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caledonia Mining and Maple Gold

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

The idea behind Caledonia Mining and Maple Gold Mines 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.