Correlation Between Caledonia Mining and Steppe Gold

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

Diversification Opportunities for Caledonia Mining and Steppe Gold

0.64

Correlation Coefficient

Caledonia Mining  Steppe Gold

Poor diversification

The 3 months correlation between Caledonia and Steppe is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Steppe Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steppe Gold 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 Steppe Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steppe Gold has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Steppe Gold go up and down completely randomly.

Pair Corralation between Caledonia Mining and Steppe Gold

Given the investment horizon of 90 days Caledonia Mining is expected to generate 0.53 times more return on investment than Steppe Gold. However, Caledonia Mining is 1.88 times less risky than Steppe Gold. It trades about 0.17 of its potential returns per unit of risk. Steppe Gold is currently generating about 0.09 per unit of risk. If you would invest  933.00  in Caledonia Mining on December 30, 2024 and sell it today you would earn a total of  228.00  from holding Caledonia Mining or generate 24.44% return on investment over 90 days.

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

Caledonia Mining  vs.  Steppe Gold

Caledonia Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Caledonia Mining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Steppe Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steppe Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Steppe Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caledonia Mining and Steppe Gold

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

The idea behind Caledonia Mining and Steppe Gold 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.