Correlation Between Flex LNG and Lundin Mining

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

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

Diversification Opportunities for Flex LNG and Lundin Mining

0.68

Correlation Coefficient

Flex LNG  Lundin Mining

Poor diversification

The 3 months correlation between Flex and Lundin is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Flex LNG and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining and Flex LNG 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 Flex LNG 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 has no effect on the direction of Flex LNG i.e., Flex LNG and Lundin Mining go up and down completely randomly.

Pair Corralation between Flex LNG and Lundin Mining

Assuming the 90 days trading horizon Flex LNG is expected to under-perform the Lundin Mining. But the stock apears to be less risky and, when comparing its historical volatility, Flex LNG is 1.44 times less risky than Lundin Mining. The stock trades about 0.0 of its potential returns per unit of risk. The Lundin Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,724  in Lundin Mining on October 9, 2024 and sell it today you would earn a total of  2,866  from holding Lundin Mining or generate 42.62% return on investment over 90 days.

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

Flex LNG  vs.  Lundin Mining

Flex LNG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flex LNG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Flex LNG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lundin Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Flex LNG and Lundin Mining

The main advantage of trading using opposite Flex LNG and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flex LNG 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 Flex LNG and Lundin Mining 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.