Correlation Between Carawine Resources and Mount Gibson

Can any of the company-specific risk be diversified away by investing in both Carawine Resources and Mount Gibson 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 Carawine Resources and Mount Gibson into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carawine Resources Limited and Mount Gibson Iron, you can compare the effects of market volatilities on Carawine Resources and Mount Gibson 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 Carawine Resources with a short position of Mount Gibson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carawine Resources and Mount Gibson.

Diversification Opportunities for Carawine Resources and Mount Gibson

-0.53

Correlation Coefficient

Carawine Resources  Mount Gibson

Excellent diversification

The 3 months correlation between Carawine and Mount is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Carawine Resources Limited and Mount Gibson Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mount Gibson Iron and Carawine Resources 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 Carawine Resources Limited are associated (or correlated) with Mount Gibson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mount Gibson Iron has no effect on the direction of Carawine Resources i.e., Carawine Resources and Mount Gibson go up and down completely randomly.

Pair Corralation between Carawine Resources and Mount Gibson

Assuming the 90 days trading horizon Carawine Resources Limited is expected to under-perform the Mount Gibson. In addition to that, Carawine Resources is 1.19 times more volatile than Mount Gibson Iron. It trades about -0.14 of its total potential returns per unit of risk. Mount Gibson Iron is currently generating about -0.11 per unit of volatility. If you would invest  32.00  in Mount Gibson Iron on October 5, 2024 and sell it today you would lose (2.00) from holding Mount Gibson Iron or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Carawine Resources Limited  vs.  Mount Gibson Iron

Carawine Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carawine Resources Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Carawine Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mount Gibson Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mount Gibson Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mount Gibson is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Carawine Resources and Mount Gibson

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

The idea behind Carawine Resources Limited and Mount Gibson Iron 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.