Correlation Between Capital Metals and Caledonia Mining

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

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

Diversification Opportunities for Capital Metals and Caledonia Mining

0.42

Correlation Coefficient

Capital Metals  Caledonia Mining

Very weak diversification

The 3 months correlation between Capital and Caledonia is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining and Capital Metals 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 Capital Metals PLC are associated (or correlated) with Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Capital Metals i.e., Capital Metals and Caledonia Mining go up and down completely randomly.

Pair Corralation between Capital Metals and Caledonia Mining

Assuming the 90 days trading horizon Capital Metals PLC is expected to generate 2.06 times more return on investment than Caledonia Mining. However, Capital Metals is 2.06 times more volatile than Caledonia Mining. It trades about -0.01 of its potential returns per unit of risk. Caledonia Mining is currently generating about -0.25 per unit of risk. If you would invest  190.00  in Capital Metals PLC on October 10, 2024 and sell it today you would lose (20.00) from holding Capital Metals PLC or give up 10.53% of portfolio value over 90 days.

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

Capital Metals PLC  vs.  Caledonia Mining

Capital Metals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Metals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Capital Metals and Caledonia Mining

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

The idea behind Capital Metals PLC and Caledonia Mining 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 Commodity Directory module to find actively traded commodities issued by global exchanges.