Correlation Between Griffin Mining and Caledonia MiningPlc

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

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

Diversification Opportunities for Griffin Mining and Caledonia MiningPlc

0.72

Correlation Coefficient

Griffin Mining  Caledonia MiningPlc

Poor diversification

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

Pair Corralation between Griffin Mining and Caledonia MiningPlc

Assuming the 90 days trading horizon Griffin Mining is expected to generate 1.19 times less return on investment than Caledonia MiningPlc. In addition to that, Griffin Mining is 1.88 times more volatile than Caledonia Mining. It trades about 0.09 of its total potential returns per unit of risk. Caledonia Mining is currently generating about 0.2 per unit of volatility. If you would invest  77,500  in Caledonia Mining on December 29, 2024 and sell it today you would earn a total of  15,000  from holding Caledonia Mining or generate 19.35% return on investment over 90 days.

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

Griffin Mining  vs.  Caledonia Mining

Griffin Mining

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Griffin Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Griffin Mining exhibited solid returns over the last few months and may actually be approaching a breakup point.

Caledonia MiningPlc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Mining are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caledonia MiningPlc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Griffin Mining and Caledonia MiningPlc

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

The idea behind Griffin Mining 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.