Correlation Between St James and Makara Mining

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

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

Diversification Opportunities for St James and Makara Mining

0.28

Correlation Coefficient

St James  Makara Mining

Modest diversification

The 3 months correlation between LRDJF and Makara is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding St James Gold and Makara Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makara Mining Corp and St James 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 St James Gold are associated (or correlated) with Makara Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makara Mining Corp has no effect on the direction of St James i.e., St James and Makara Mining go up and down completely randomly.

Pair Corralation between St James and Makara Mining

Assuming the 90 days horizon St James is expected to generate 10.2 times less return on investment than Makara Mining. But when comparing it to its historical volatility, St James Gold is 3.53 times less risky than Makara Mining. It trades about 0.05 of its potential returns per unit of risk. Makara Mining Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Makara Mining Corp on September 14, 2024 and sell it today you would earn a total of  1.80  from holding Makara Mining Corp or generate 25.71% return on investment over 90 days.

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

St James Gold  vs.  Makara Mining Corp

St James Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in St James Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, St James reported solid returns over the last few months and may actually be approaching a breakup point.

Makara Mining Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Makara Mining Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Makara Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with St James and Makara Mining

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

The idea behind St James Gold and Makara Mining 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.