Correlation Between Capstone Mining and New Zealand

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

Diversification Opportunities for Capstone Mining and New Zealand

0.72

Correlation Coefficient

Capstone Mining  New Zealand

Poor diversification

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

Pair Corralation between Capstone Mining and New Zealand

Assuming the 90 days horizon Capstone Mining Corp is expected to generate 0.37 times more return on investment than New Zealand. However, Capstone Mining Corp is 2.67 times less risky than New Zealand. It trades about 0.01 of its potential returns per unit of risk. New Zealand Energy is currently generating about -0.15 per unit of risk. If you would invest  886.00  in Capstone Mining Corp on December 20, 2024 and sell it today you would lose (8.00) from holding Capstone Mining Corp or give up 0.9% 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.  New Zealand Energy

Capstone Mining Corp

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Mining Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Capstone Mining is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

New Zealand Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Zealand Energy 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 fairly stable which may send shares a bit higher in April 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 New Zealand

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

The idea behind Capstone Mining Corp and New Zealand Energy 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.