Correlation Between Aberdeen Diversified and Lundin Mining

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

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

Diversification Opportunities for Aberdeen Diversified and Lundin Mining

-0.13

Correlation Coefficient

Aberdeen Diversified  Lundin Mining

Good diversification

The 3 months correlation between Aberdeen and Lundin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Diversified Income and Lundin Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining Corp and Aberdeen Diversified 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 Aberdeen Diversified Income are associated (or correlated) with Lundin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Mining Corp has no effect on the direction of Aberdeen Diversified i.e., Aberdeen Diversified and Lundin Mining go up and down completely randomly.

Pair Corralation between Aberdeen Diversified and Lundin Mining

Assuming the 90 days trading horizon Aberdeen Diversified is expected to generate 4.73 times less return on investment than Lundin Mining. But when comparing it to its historical volatility, Aberdeen Diversified Income is 1.79 times less risky than Lundin Mining. It trades about 0.02 of its potential returns per unit of risk. Lundin Mining Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,867  in Lundin Mining Corp on September 28, 2024 and sell it today you would earn a total of  2,943  from holding Lundin Mining Corp or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Aberdeen Diversified Income  vs.  Lundin Mining Corp

Aberdeen Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Diversified Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Aberdeen Diversified is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Aberdeen Diversified and Lundin Mining

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

The idea behind Aberdeen Diversified Income and Lundin Mining Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.