Correlation Between Capstone Mining and MAG Silver

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

Diversification Opportunities for Capstone Mining and MAG Silver

-0.19

Correlation Coefficient

Capstone Mining  MAG Silver

Good diversification

The 3 months correlation between Capstone and MAG is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Mining Corp and MAG Silver Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAG Silver Corp 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 MAG Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAG Silver Corp has no effect on the direction of Capstone Mining i.e., Capstone Mining and MAG Silver go up and down completely randomly.

Pair Corralation between Capstone Mining and MAG Silver

Assuming the 90 days horizon Capstone Mining Corp is expected to under-perform the MAG Silver. In addition to that, Capstone Mining is 1.11 times more volatile than MAG Silver Corp. It trades about -0.04 of its total potential returns per unit of risk. MAG Silver Corp is currently generating about 0.1 per unit of volatility. If you would invest  1,912  in MAG Silver Corp on December 29, 2024 and sell it today you would earn a total of  332.00  from holding MAG Silver Corp or generate 17.36% return on investment over 90 days.

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

Capstone Mining Corp  vs.  MAG Silver Corp

Capstone Mining Corp

Risk-Adjusted Performance

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.

MAG Silver Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAG Silver Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, MAG Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capstone Mining and MAG Silver

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

The idea behind Capstone Mining Corp and MAG Silver 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.

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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.