Correlation Between Capella Minerals and American Sierra

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

By analyzing existing cross correlation between Capella Minerals Limited and American Sierra Gold, you can compare the effects of market volatilities on Capella Minerals and American Sierra 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 American Sierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capella Minerals and American Sierra.

Diversification Opportunities for Capella Minerals and American Sierra

0.17

Correlation Coefficient

Capella Minerals  American Sierra

Average diversification

The 3 months correlation between Capella and American is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Capella Minerals Limited and American Sierra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Sierra Gold 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 Limited are associated (or correlated) with American Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Sierra Gold has no effect on the direction of Capella Minerals i.e., Capella Minerals and American Sierra go up and down completely randomly.

Pair Corralation between Capella Minerals and American Sierra

Assuming the 90 days horizon Capella Minerals Limited is expected to generate 3.29 times more return on investment than American Sierra. However, Capella Minerals is 3.29 times more volatile than American Sierra Gold. It trades about 0.14 of its potential returns per unit of risk. American Sierra Gold is currently generating about 0.07 per unit of risk. If you would invest  2.23  in Capella Minerals Limited on December 30, 2024 and sell it today you would earn a total of  0.63  from holding Capella Minerals Limited or generate 28.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Capella Minerals Limited  vs.  American Sierra Gold

Capella Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capella Minerals Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Capella Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

American Sierra Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Sierra Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, American Sierra reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capella Minerals and American Sierra

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

The idea behind Capella Minerals Limited and American Sierra 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.