Correlation Between Lundin Mining and Central Asia

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

Diversification Opportunities for Lundin Mining and Central Asia

0.11

Correlation Coefficient

Lundin Mining  Central Asia

Average diversification

The 3 months correlation between Lundin and Central is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining Corp and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals 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 Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of Lundin Mining i.e., Lundin Mining and Central Asia go up and down completely randomly.

Pair Corralation between Lundin Mining and Central Asia

Assuming the 90 days trading horizon Lundin Mining Corp is expected to generate 1.69 times more return on investment than Central Asia. However, Lundin Mining is 1.69 times more volatile than Central Asia Metals. It trades about 0.09 of its potential returns per unit of risk. Central Asia Metals is currently generating about -0.04 per unit of risk. If you would invest  9,353  in Lundin Mining Corp on September 3, 2024 and sell it today you would earn a total of  1,402  from holding Lundin Mining Corp or generate 14.99% return on investment over 90 days.

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

Lundin Mining Corp  vs.  Central Asia Metals

Lundin Mining Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Mining Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lundin Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Asia 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 Central Asia

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

The idea behind Lundin Mining Corp and Central Asia Metals 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.