Correlation Between Capstone Mining and Diamond Fields

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

By analyzing existing cross correlation between Capstone Mining Corp and Diamond Fields Resources, you can compare the effects of market volatilities on Capstone Mining and Diamond Fields 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 Capstone Mining with a short position of Diamond Fields. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capstone Mining and Diamond Fields.

Diversification Opportunities for Capstone Mining and Diamond Fields

0.2

Correlation Coefficient

Capstone Mining  Diamond Fields

Modest diversification

The 3 months correlation between Capstone and Diamond is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Mining Corp and Diamond Fields Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Fields Resources and Capstone 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 Capstone Mining Corp are associated (or correlated) with Diamond Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Fields Resources has no effect on the direction of Capstone Mining i.e., Capstone Mining and Diamond Fields go up and down completely randomly.

Pair Corralation between Capstone Mining and Diamond Fields

Assuming the 90 days horizon Capstone Mining is expected to generate 11.84 times less return on investment than Diamond Fields. But when comparing it to its historical volatility, Capstone Mining Corp is 3.05 times less risky than Diamond Fields. It trades about 0.01 of its potential returns per unit of risk. Diamond Fields Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Diamond Fields Resources on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Diamond Fields Resources or generate 0.0% return on investment over 90 days.

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

Capstone Mining Corp  vs.  Diamond Fields Resources

Capstone Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Capstone Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Diamond Fields Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Fields Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Diamond Fields showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capstone Mining and Diamond Fields

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

The idea behind Capstone Mining Corp and Diamond Fields Resources 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.