Correlation Between Eskay Mining and Capitan Mining

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

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

Diversification Opportunities for Eskay Mining and Capitan Mining

-0.67

Correlation Coefficient

Eskay Mining  Capitan Mining

Excellent diversification

The 3 months correlation between Eskay and Capitan is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eskay Mining Corp and Capitan Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitan Mining and Eskay 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 Eskay Mining Corp are associated (or correlated) with Capitan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitan Mining has no effect on the direction of Eskay Mining i.e., Eskay Mining and Capitan Mining go up and down completely randomly.

Pair Corralation between Eskay Mining and Capitan Mining

Assuming the 90 days horizon Eskay Mining Corp is expected to under-perform the Capitan Mining. But the stock apears to be less risky and, when comparing its historical volatility, Eskay Mining Corp is 1.13 times less risky than Capitan Mining. The stock trades about -0.04 of its potential returns per unit of risk. The Capitan Mining is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Capitan Mining on September 22, 2024 and sell it today you would earn a total of  2.00  from holding Capitan Mining or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Eskay Mining Corp  vs.  Capitan Mining

Eskay Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eskay Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Eskay Mining is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Capitan Mining

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Eskay Mining and Capitan Mining

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

The idea behind Eskay Mining Corp and Capitan 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.