Correlation Between Alamos Gold and Lundin Gold

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

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

Diversification Opportunities for Alamos Gold and Lundin Gold

0.85

Correlation Coefficient

Alamos Gold  Lundin Gold

Very poor diversification

The 3 months correlation between Alamos and Lundin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alamos Gold and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold and Alamos Gold 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 Alamos Gold are associated (or correlated) with Lundin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Gold has no effect on the direction of Alamos Gold i.e., Alamos Gold and Lundin Gold go up and down completely randomly.

Pair Corralation between Alamos Gold and Lundin Gold

Assuming the 90 days trading horizon Alamos Gold is expected to generate 0.72 times more return on investment than Lundin Gold. However, Alamos Gold is 1.39 times less risky than Lundin Gold. It trades about 0.32 of its potential returns per unit of risk. Lundin Gold is currently generating about 0.22 per unit of risk. If you would invest  2,591  in Alamos Gold on December 30, 2024 and sell it today you would earn a total of  1,216  from holding Alamos Gold or generate 46.93% return on investment over 90 days.

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

Alamos Gold  vs.  Lundin Gold

Alamos Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alamos Gold are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, Alamos Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Lundin Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Gold are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Lundin Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alamos Gold and Lundin Gold

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

The idea behind Alamos Gold and Lundin Gold 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.