Correlation Between Europa Metals and Lundin Mining

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

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

Diversification Opportunities for Europa Metals and Lundin Mining

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Correlation Coefficient

Europa Metals  Lundin Mining

Pay attention - limited upside

The 3 months correlation between Europa and Lundin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Europa Metals 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 Europa Metals 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 Europa Metals 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 Europa Metals i.e., Europa Metals and Lundin Mining go up and down completely randomly.

Pair Corralation between Europa Metals and Lundin Mining

Assuming the 90 days trading horizon Europa Metals is expected to generate 4.73 times less return on investment than Lundin Mining. In addition to that, Europa Metals is 1.28 times more volatile than Lundin Mining Corp. It trades about 0.01 of its total potential returns per unit of risk. Lundin Mining Corp is currently generating about 0.07 per unit of volatility. If you would invest  6,367  in Lundin Mining Corp on October 8, 2024 and sell it today you would earn a total of  3,183  from holding Lundin Mining Corp or generate 49.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.66%
Values	Daily Returns

Europa Metals  vs.  Lundin Mining Corp

Europa Metals

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Europa Metals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Europa Metals and Lundin Mining

The main advantage of trading using opposite Europa Metals and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Europa Metals 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 Europa Metals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.