Correlation Between Centerra Gold and Lundin Gold

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

Diversification Opportunities for Centerra Gold and Lundin Gold

0.36

Correlation Coefficient

Centerra Gold  Lundin Gold

Weak diversification

The 3 months correlation between Centerra and Lundin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Centerra Gold and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold and Centerra 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 Centerra 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 Centerra Gold i.e., Centerra Gold and Lundin Gold go up and down completely randomly.

Pair Corralation between Centerra Gold and Lundin Gold

Assuming the 90 days horizon Centerra Gold is expected to generate 2.44 times less return on investment than Lundin Gold. But when comparing it to its historical volatility, Centerra Gold is 1.17 times less risky than Lundin Gold. It trades about 0.11 of its potential returns per unit of risk. Lundin Gold is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,047  in Lundin Gold on December 30, 2024 and sell it today you would earn a total of  1,302  from holding Lundin Gold or generate 42.73% return on investment over 90 days.

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

Centerra Gold  vs.  Lundin Gold

Centerra Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Centerra 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 Centerra Gold and Lundin Gold

The main advantage of trading using opposite Centerra Gold and Lundin Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centerra 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 Centerra 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.