Correlation Between Robex Resources and Caledonia Mining

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

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

Diversification Opportunities for Robex Resources and Caledonia Mining

0.69

Correlation Coefficient

Robex Resources  Caledonia Mining

Poor diversification

The 3 months correlation between Robex and Caledonia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Robex Resources and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining and Robex 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 Robex Resources 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 Robex Resources i.e., Robex Resources and Caledonia Mining go up and down completely randomly.

Pair Corralation between Robex Resources and Caledonia Mining

Assuming the 90 days horizon Robex Resources is expected to generate 1.6 times less return on investment than Caledonia Mining. In addition to that, Robex Resources is 1.4 times more volatile than Caledonia Mining. It trades about 0.08 of its total potential returns per unit of risk. Caledonia Mining is currently generating about 0.17 per unit of volatility. If you would invest  933.00  in Caledonia Mining on December 29, 2024 and sell it today you would earn a total of  228.00  from holding Caledonia Mining or generate 24.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Robex Resources  vs.  Caledonia Mining

Robex Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Robex Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Robex Resources reported 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 Robex Resources and Caledonia Mining

The main advantage of trading using opposite Robex Resources and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Robex Resources 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 Robex Resources 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.