Correlation Between Capstone Mining and Nortec Minerals

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

Diversification Opportunities for Capstone Mining and Nortec Minerals

-0.06

Correlation Coefficient

Capstone Mining  Nortec Minerals

Good diversification

The 3 months correlation between Capstone and Nortec is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Mining Corp and Nortec Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nortec Minerals 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 Nortec Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nortec Minerals Corp has no effect on the direction of Capstone Mining i.e., Capstone Mining and Nortec Minerals go up and down completely randomly.

Pair Corralation between Capstone Mining and Nortec Minerals

Assuming the 90 days horizon Capstone Mining Corp is expected to under-perform the Nortec Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Capstone Mining Corp is 3.74 times less risky than Nortec Minerals. The stock trades about -0.06 of its potential returns per unit of risk. The Nortec Minerals Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Nortec Minerals Corp on September 26, 2024 and sell it today you would earn a total of  0.00  from holding Nortec Minerals Corp or generate 0.0% 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.  Nortec Minerals Corp

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

Nortec Minerals Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nortec Minerals Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Nortec Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capstone Mining and Nortec Minerals

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

The idea behind Capstone Mining Corp and Nortec Minerals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.