Correlation Between Capstone Mining and First National

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

Diversification Opportunities for Capstone Mining and First National

-0.81

Correlation Coefficient

Capstone Mining  First National

Pay attention - limited upside

The 3 months correlation between Capstone and First is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Mining Corp and First National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Financial 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Financial has no effect on the direction of Capstone Mining i.e., Capstone Mining and First National go up and down completely randomly.

Pair Corralation between Capstone Mining and First National

Assuming the 90 days horizon Capstone Mining Corp is expected to generate 2.8 times more return on investment than First National. However, Capstone Mining is 2.8 times more volatile than First National Financial. It trades about 0.06 of its potential returns per unit of risk. First National Financial is currently generating about 0.1 per unit of risk. If you would invest  634.00  in Capstone Mining Corp on October 6, 2024 and sell it today you would earn a total of  266.00  from holding Capstone Mining Corp or generate 41.96% return on investment over 90 days.

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

Capstone Mining Corp  vs.  First National Financial

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 abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

First National Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First National Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, First National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Capstone Mining and First National

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

The idea behind Capstone Mining Corp and First National Financial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.