Correlation Between Fortuna Silver and Caledonia Mining

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

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

Diversification Opportunities for Fortuna Silver and Caledonia Mining

0.56

Correlation Coefficient

Fortuna Silver  Caledonia Mining

Very weak diversification

The 3 months correlation between Fortuna and Caledonia is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fortuna Silver Mines and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining and Fortuna Silver 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 Fortuna Silver Mines 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 Fortuna Silver i.e., Fortuna Silver and Caledonia Mining go up and down completely randomly.

Pair Corralation between Fortuna Silver and Caledonia Mining

Considering the 90-day investment horizon Fortuna Silver Mines is expected to generate 1.61 times more return on investment than Caledonia Mining. However, Fortuna Silver is 1.61 times more volatile than Caledonia Mining. It trades about 0.19 of its potential returns per unit of risk. Caledonia Mining is currently generating about 0.17 per unit of risk. If you would invest  421.00  in Fortuna Silver Mines on December 30, 2024 and sell it today you would earn a total of  191.00  from holding Fortuna Silver Mines or generate 45.37% return on investment over 90 days.

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

Fortuna Silver Mines  vs.  Caledonia Mining

Fortuna Silver Mines

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortuna Silver Mines are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Fortuna Silver displayed 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 13 (%) 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 Fortuna Silver and Caledonia Mining

The main advantage of trading using opposite Fortuna Silver and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortuna Silver 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 Fortuna Silver Mines 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.