Correlation Between Caledonia Mining and State Street

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

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

Diversification Opportunities for Caledonia Mining and State Street

-0.42

Correlation Coefficient

Caledonia Mining  State Street

Very good diversification

The 3 months correlation between Caledonia and State is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Corp and Caledonia 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 Caledonia Mining are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Corp has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and State Street go up and down completely randomly.

Pair Corralation between Caledonia Mining and State Street

Assuming the 90 days trading horizon Caledonia Mining is expected to under-perform the State Street. In addition to that, Caledonia Mining is 2.11 times more volatile than State Street Corp. It trades about -0.07 of its total potential returns per unit of risk. State Street Corp is currently generating about 0.25 per unit of volatility. If you would invest  8,180  in State Street Corp on September 12, 2024 and sell it today you would earn a total of  1,717  from holding State Street Corp or generate 20.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Caledonia Mining  vs.  State Street Corp

Caledonia Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caledonia Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

State Street Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, State Street unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caledonia Mining and State Street

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

The idea behind Caledonia Mining and State Street Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.