Correlation Between Lowland Investment and Caledonia Mining

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

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

Diversification Opportunities for Lowland Investment and Caledonia Mining

0.16

Correlation Coefficient

Lowland Investment  Caledonia Mining

Average diversification

The 3 months correlation between Lowland and Caledonia is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lowland Investment Co and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining and Lowland Investment 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 Lowland Investment Co 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 Lowland Investment i.e., Lowland Investment and Caledonia Mining go up and down completely randomly.

Pair Corralation between Lowland Investment and Caledonia Mining

Assuming the 90 days trading horizon Lowland Investment Co is expected to generate 0.45 times more return on investment than Caledonia Mining. However, Lowland Investment Co is 2.24 times less risky than Caledonia Mining. It trades about 0.09 of its potential returns per unit of risk. Caledonia Mining is currently generating about -0.38 per unit of risk. If you would invest  12,600  in Lowland Investment Co on September 12, 2024 and sell it today you would earn a total of  250.00  from holding Lowland Investment Co or generate 1.98% return on investment over 90 days.

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

Lowland Investment Co  vs.  Caledonia Mining

Lowland Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lowland Investment Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Lowland Investment is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Lowland Investment and Caledonia Mining

The main advantage of trading using opposite Lowland Investment and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowland Investment 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 Lowland Investment Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.