Correlation Between Lundin Mining and TechnipFMC PLC

Can any of the company-specific risk be diversified away by investing in both Lundin Mining and TechnipFMC 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 Lundin Mining and TechnipFMC PLC 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 TechnipFMC PLC, you can compare the effects of market volatilities on Lundin Mining and TechnipFMC 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 Lundin Mining with a short position of TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lundin Mining and TechnipFMC PLC.

Diversification Opportunities for Lundin Mining and TechnipFMC PLC

0.68

Correlation Coefficient

Lundin Mining  TechnipFMC PLC

Poor diversification

The 3 months correlation between Lundin and TechnipFMC is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining Corp and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC 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 TechnipFMC PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC PLC has no effect on the direction of Lundin Mining i.e., Lundin Mining and TechnipFMC PLC go up and down completely randomly.

Pair Corralation between Lundin Mining and TechnipFMC PLC

Assuming the 90 days trading horizon Lundin Mining Corp is expected to under-perform the TechnipFMC PLC. In addition to that, Lundin Mining is 1.17 times more volatile than TechnipFMC PLC. It trades about -0.03 of its total potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.03 per unit of volatility. If you would invest  2,784  in TechnipFMC PLC on December 27, 2024 and sell it today you would earn a total of  90.00  from holding TechnipFMC PLC or generate 3.23% return on investment over 90 days.

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

Lundin Mining Corp  vs.  TechnipFMC PLC

Lundin Mining Corp

Risk-Adjusted Performance

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 comparatively stable basic indicators, Lundin Mining is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

TechnipFMC PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, TechnipFMC PLC 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 TechnipFMC PLC

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

The idea behind Lundin Mining Corp and TechnipFMC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.