Correlation Between Lundin Mining and Electronic Arts

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

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

Diversification Opportunities for Lundin Mining and Electronic Arts

0.21

Correlation Coefficient

Lundin Mining  Electronic Arts

Modest diversification

The 3 months correlation between Lundin and Electronic is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining Corp and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Lundin 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 Lundin Mining Corp are associated (or correlated) with Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Lundin Mining i.e., Lundin Mining and Electronic Arts go up and down completely randomly.

Pair Corralation between Lundin Mining and Electronic Arts

Assuming the 90 days trading horizon Lundin Mining Corp is expected to generate 2.55 times more return on investment than Electronic Arts. However, Lundin Mining is 2.55 times more volatile than Electronic Arts. It trades about -0.2 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.65 per unit of risk. If you would invest  10,964  in Lundin Mining Corp on October 10, 2024 and sell it today you would lose (1,119) from holding Lundin Mining Corp or give up 10.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Lundin Mining Corp  vs.  Electronic Arts

Lundin Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Mining Corp 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.

Electronic Arts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Electronic Arts is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lundin Mining and Electronic Arts

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

The idea behind Lundin Mining Corp and Electronic Arts 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.