Correlation Between Graphite One and Lundin Gold

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

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

Diversification Opportunities for Graphite One and Lundin Gold

0.65

Correlation Coefficient

Graphite One  Lundin Gold

Poor diversification

The 3 months correlation between Graphite and Lundin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Graphite One and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold and Graphite One 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 Graphite One 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 Graphite One i.e., Graphite One and Lundin Gold go up and down completely randomly.

Pair Corralation between Graphite One and Lundin Gold

Assuming the 90 days horizon Graphite One is expected to under-perform the Lundin Gold. In addition to that, Graphite One is 1.59 times more volatile than Lundin Gold. It trades about -0.04 of its total potential returns per unit of risk. Lundin Gold is currently generating about 0.04 per unit of volatility. If you would invest  3,090  in Lundin Gold on October 5, 2024 and sell it today you would earn a total of  107.00  from holding Lundin Gold or generate 3.46% return on investment over 90 days.

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

Graphite One  vs.  Lundin Gold

Graphite One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graphite One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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 Graphite One and Lundin Gold

The main advantage of trading using opposite Graphite One and Lundin Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graphite One 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 Graphite One 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.