Correlation Between Fjordland Exploration and Lundin Gold

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

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

Diversification Opportunities for Fjordland Exploration and Lundin Gold

0.06

Correlation Coefficient

Fjordland Exploration  Lundin Gold

Significant diversification

The 3 months correlation between Fjordland and Lundin is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Fjordland Exploration and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold and Fjordland Exploration 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 Fjordland Exploration 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 Fjordland Exploration i.e., Fjordland Exploration and Lundin Gold go up and down completely randomly.

Pair Corralation between Fjordland Exploration and Lundin Gold

Assuming the 90 days horizon Fjordland Exploration is expected to generate 6.12 times more return on investment than Lundin Gold. However, Fjordland Exploration is 6.12 times more volatile than Lundin Gold. It trades about 0.04 of its potential returns per unit of risk. Lundin Gold is currently generating about 0.12 per unit of risk. If you would invest  3.00  in Fjordland Exploration on October 5, 2024 and sell it today you would lose (2.00) from holding Fjordland Exploration or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Fjordland Exploration  vs.  Lundin Gold

Fjordland Exploration

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fjordland Exploration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Fjordland Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Lundin Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Lundin Gold is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fjordland Exploration and Lundin Gold

The main advantage of trading using opposite Fjordland Exploration and Lundin Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fjordland Exploration 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 Fjordland Exploration 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.