Correlation Between Chilwa Minerals and Lindian Resources

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

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

Diversification Opportunities for Chilwa Minerals and Lindian Resources

0.25

Correlation Coefficient

Chilwa Minerals  Lindian Resources

Modest diversification

The 3 months correlation between Chilwa and Lindian is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Chilwa Minerals Limited and Lindian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindian Resources and Chilwa Minerals 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 Chilwa Minerals Limited are associated (or correlated) with Lindian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindian Resources has no effect on the direction of Chilwa Minerals i.e., Chilwa Minerals and Lindian Resources go up and down completely randomly.

Pair Corralation between Chilwa Minerals and Lindian Resources

Assuming the 90 days trading horizon Chilwa Minerals is expected to generate 1.84 times less return on investment than Lindian Resources. But when comparing it to its historical volatility, Chilwa Minerals Limited is 1.49 times less risky than Lindian Resources. It trades about 0.07 of its potential returns per unit of risk. Lindian Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Lindian Resources on December 27, 2024 and sell it today you would earn a total of  1.60  from holding Lindian Resources or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Chilwa Minerals Limited  vs.  Lindian Resources

Chilwa Minerals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chilwa Minerals Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Chilwa Minerals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lindian Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lindian Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lindian Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chilwa Minerals and Lindian Resources

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

The idea behind Chilwa Minerals Limited and Lindian Resources 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.