Correlation Between Valhi and Caledonia Mining

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

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

Diversification Opportunities for Valhi and Caledonia Mining

0.06

Correlation Coefficient

Valhi  Caledonia Mining

Significant diversification

The 3 months correlation between Valhi and Caledonia is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining and Valhi 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 Valhi Inc 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 Valhi i.e., Valhi and Caledonia Mining go up and down completely randomly.

Pair Corralation between Valhi and Caledonia Mining

Considering the 90-day investment horizon Valhi Inc is expected to under-perform the Caledonia Mining. But the stock apears to be less risky and, when comparing its historical volatility, Valhi Inc is 1.05 times less risky than Caledonia Mining. The stock trades about -0.49 of its potential returns per unit of risk. The Caledonia Mining is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  958.00  in Caledonia Mining on December 1, 2024 and sell it today you would earn a total of  49.00  from holding Caledonia Mining or generate 5.11% return on investment over 90 days.

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

Valhi Inc  vs.  Caledonia Mining

Valhi Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Caledonia Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caledonia Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Caledonia Mining is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Valhi and Caledonia Mining

The main advantage of trading using opposite Valhi and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valhi 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 Valhi Inc 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.