Correlation Between Capella Minerals and Precipitate Gold

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

By analyzing existing cross correlation between Capella Minerals and Precipitate Gold Corp, you can compare the effects of market volatilities on Capella Minerals and Precipitate 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 Capella Minerals with a short position of Precipitate Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capella Minerals and Precipitate Gold.

Diversification Opportunities for Capella Minerals and Precipitate Gold

-0.43

Correlation Coefficient

Capella Minerals  Precipitate Gold

Very good diversification

The 3 months correlation between Capella and Precipitate is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Capella Minerals and Precipitate Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precipitate Gold Corp and Capella Minerals 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 Capella Minerals are associated (or correlated) with Precipitate Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precipitate Gold Corp has no effect on the direction of Capella Minerals i.e., Capella Minerals and Precipitate Gold go up and down completely randomly.

Pair Corralation between Capella Minerals and Precipitate Gold

Assuming the 90 days trading horizon Capella Minerals is expected to generate 10.24 times more return on investment than Precipitate Gold. However, Capella Minerals is 10.24 times more volatile than Precipitate Gold Corp. It trades about 0.18 of its potential returns per unit of risk. Precipitate Gold Corp is currently generating about 0.24 per unit of risk. If you would invest  6.00  in Capella Minerals on October 15, 2024 and sell it today you would lose (2.00) from holding Capella Minerals or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Capella Minerals  vs.  Precipitate Gold Corp

Capella Minerals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capella Minerals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, Capella Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Precipitate Gold Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Precipitate Gold Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Precipitate Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capella Minerals and Precipitate Gold

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

The idea behind Capella Minerals and Precipitate 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.

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.