Correlation Between Caledonia Mining and FirstGroup PLC

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

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

Diversification Opportunities for Caledonia Mining and FirstGroup PLC

0.91

Correlation Coefficient

Caledonia Mining  FirstGroup PLC

Almost no diversification

The 3 months correlation between Caledonia and FirstGroup is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Caledonia Mining and FirstGroup PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup PLC 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 FirstGroup PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup PLC has no effect on the direction of Caledonia Mining i.e., Caledonia Mining and FirstGroup PLC go up and down completely randomly.

Pair Corralation between Caledonia Mining and FirstGroup PLC

Assuming the 90 days trading horizon Caledonia Mining is expected to generate 1.3 times more return on investment than FirstGroup PLC. However, Caledonia Mining is 1.3 times more volatile than FirstGroup PLC. It trades about 0.32 of its potential returns per unit of risk. FirstGroup PLC is currently generating about 0.27 per unit of risk. If you would invest  101,144  in Caledonia Mining on April 24, 2025 and sell it today you would earn a total of  61,856  from holding Caledonia Mining or generate 61.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Caledonia Mining  vs.  FirstGroup PLC

Caledonia Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caledonia Mining are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caledonia Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

FirstGroup PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FirstGroup PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, FirstGroup PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caledonia Mining and FirstGroup PLC

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

The idea behind Caledonia Mining and FirstGroup PLC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.