Correlation Between URU Metals and Caledonia MiningPlc

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

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

Diversification Opportunities for URU Metals and Caledonia MiningPlc

-0.46

Correlation Coefficient

URU Metals  Caledonia MiningPlc

Very good diversification

The 3 months correlation between URU and Caledonia is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding URU Metals and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia MiningPlc and URU Metals 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 URU Metals 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 URU Metals i.e., URU Metals and Caledonia MiningPlc go up and down completely randomly.

Pair Corralation between URU Metals and Caledonia MiningPlc

Assuming the 90 days trading horizon URU Metals is expected to under-perform the Caledonia MiningPlc. In addition to that, URU Metals is 3.15 times more volatile than Caledonia Mining. It trades about -0.12 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  77,500  in Caledonia Mining on December 23, 2024 and sell it today you would earn a total of  11,000  from holding Caledonia Mining or generate 14.19% return on investment over 90 days.

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

URU Metals  vs.  Caledonia Mining

URU Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days URU Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Caledonia MiningPlc

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. 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 URU Metals and Caledonia MiningPlc

The main advantage of trading using opposite URU Metals and Caledonia MiningPlc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if URU Metals 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 URU Metals 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..