Correlation Between Lundin Mining and Capital Drilling

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

Diversification Opportunities for Lundin Mining and Capital Drilling

0.14

Correlation Coefficient

Lundin Mining  Capital Drilling

Average diversification

The 3 months correlation between Lundin and Capital is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining Corp and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Lundin Mining i.e., Lundin Mining and Capital Drilling go up and down completely randomly.

Pair Corralation between Lundin Mining and Capital Drilling

Assuming the 90 days trading horizon Lundin Mining Corp is expected to under-perform the Capital Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Lundin Mining Corp is 1.17 times less risky than Capital Drilling. The stock trades about -0.36 of its potential returns per unit of risk. The Capital Drilling is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,400  in Capital Drilling on September 22, 2024 and sell it today you would lose (80.00) from holding Capital Drilling or give up 0.95% of portfolio value over 90 days.

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

Lundin Mining Corp  vs.  Capital Drilling

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 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.

Capital Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Lundin Mining Corp and Capital Drilling 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.