Correlation Between Capstone Mining and Diamond Estates

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

Diversification Opportunities for Capstone Mining and Diamond Estates

0.72

Correlation Coefficient

Capstone Mining  Diamond Estates

Poor diversification

The 3 months correlation between Capstone and Diamond is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Mining Corp and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines 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 Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of Capstone Mining i.e., Capstone Mining and Diamond Estates go up and down completely randomly.

Pair Corralation between Capstone Mining and Diamond Estates

Assuming the 90 days horizon Capstone Mining Corp is expected to generate 0.49 times more return on investment than Diamond Estates. However, Capstone Mining Corp is 2.05 times less risky than Diamond Estates. It trades about -0.12 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.17 per unit of risk. If you would invest  1,015  in Capstone Mining Corp on September 21, 2024 and sell it today you would lose (140.00) from holding Capstone Mining Corp or give up 13.79% of portfolio value over 90 days.

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

Capstone Mining Corp  vs.  Diamond Estates Wines

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Diamond Estates Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Estates Wines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Capstone Mining and Diamond Estates

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

The idea behind Capstone Mining Corp and Diamond Estates Wines 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.