Correlation Between Capstone Mining and Monument Mining

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Can any of the company-specific risk be diversified away by investing in both Capstone Mining and Monument 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 Capstone Mining and Monument Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capstone Mining Corp and Monument Mining Limited, you can compare the effects of market volatilities on Capstone Mining and Monument 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 Capstone Mining with a short position of Monument Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capstone Mining and Monument Mining.

Diversification Opportunities for Capstone Mining and Monument Mining

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Capstone and Monument is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Mining Corp and Monument Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Mining and Capstone 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 Capstone Mining Corp are associated (or correlated) with Monument Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Mining has no effect on the direction of Capstone Mining i.e., Capstone Mining and Monument Mining go up and down completely randomly.

Pair Corralation between Capstone Mining and Monument Mining

Assuming the 90 days horizon Capstone Mining is expected to generate 2.91 times less return on investment than Monument Mining. But when comparing it to its historical volatility, Capstone Mining Corp is 1.81 times less risky than Monument Mining. It trades about 0.11 of its potential returns per unit of risk. Monument Mining Limited is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Monument Mining Limited on September 6, 2024 and sell it today you would earn a total of  9.00  from holding Monument Mining Limited or generate 56.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Capstone Mining Corp  vs.  Monument Mining Limited

 Performance 
       Timeline  
Capstone Mining Corp 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Mining Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Capstone Mining displayed solid returns over the last few months and may actually be approaching a breakup point.
Monument Mining 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Monument Mining Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Monument Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Capstone Mining and Monument Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Capstone Mining and Monument Mining

The main advantage of trading using opposite Capstone Mining and Monument Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capstone Mining position performs unexpectedly, Monument 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 Monument Mining will offset losses from the drop in Monument Mining's long position.
The idea behind Capstone Mining Corp and Monument Mining Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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