Correlation Between EMX Royalty and Caledonia Mining

Can any of the company-specific risk be diversified away by investing in both EMX Royalty and Caledonia Mining 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 EMX Royalty and Caledonia Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EMX Royalty Corp and Caledonia Mining, you can compare the effects of market volatilities on EMX Royalty and Caledonia Mining 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 EMX Royalty with a short position of Caledonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMX Royalty and Caledonia Mining.

Diversification Opportunities for EMX Royalty and Caledonia Mining

0.83

Correlation Coefficient

EMX Royalty  Caledonia Mining

Very poor diversification

The 3 months correlation between EMX and Caledonia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding EMX Royalty Corp and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining and EMX Royalty 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 EMX Royalty Corp are associated (or correlated) with Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of EMX Royalty i.e., EMX Royalty and Caledonia Mining go up and down completely randomly.

Pair Corralation between EMX Royalty and Caledonia Mining

Considering the 90-day investment horizon EMX Royalty is expected to generate 1.25 times less return on investment than Caledonia Mining. But when comparing it to its historical volatility, EMX Royalty Corp is 1.22 times less risky than Caledonia Mining. It trades about 0.18 of its potential returns per unit of risk. Caledonia Mining is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  933.00  in Caledonia Mining on December 28, 2024 and sell it today you would earn a total of  251.00  from holding Caledonia Mining or generate 26.9% return on investment over 90 days.

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

EMX Royalty Corp  vs.  Caledonia Mining

EMX Royalty Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMX Royalty Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, EMX Royalty showed solid returns over the last few months and may actually be approaching a breakup point.

Caledonia Mining

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Caledonia Mining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMX Royalty and Caledonia Mining

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

The idea behind EMX Royalty Corp and Caledonia Mining 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 Transaction History module to view history of all your transactions and understand their impact on performance.