Correlation Between Caledonia Mining and Collective Mining

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

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

Diversification Opportunities for Caledonia Mining and Collective Mining

-0.09

Correlation Coefficient

Caledonia Mining  Collective Mining

Good diversification

The 3 months correlation between Caledonia and Collective is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and Collective Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collective Mining 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 Collective Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collective Mining has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and Collective Mining go up and down completely randomly.

Pair Corralation between Caledonia Mining and Collective Mining

Given the investment horizon of 90 days Caledonia Mining is expected to under-perform the Collective Mining. In addition to that, Caledonia Mining is 1.1 times more volatile than Collective Mining. It trades about -0.07 of its total potential returns per unit of risk. Collective Mining is currently generating about 0.08 per unit of volatility. If you would invest  317.00  in Collective Mining on September 3, 2024 and sell it today you would earn a total of  14.00  from holding Collective Mining or generate 4.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	35.94%
Values	Daily Returns

Caledonia Mining  vs.  Collective Mining

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. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Collective Mining

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Collective Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile primary indicators, Collective Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caledonia Mining and Collective Mining

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

The idea behind Caledonia Mining and Collective 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.