Correlation Between Lundin Mining and CITIC Telecom

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

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

Diversification Opportunities for Lundin Mining and CITIC Telecom

-0.09

Correlation Coefficient

Lundin Mining  CITIC Telecom

Good diversification

The 3 months correlation between Lundin and CITIC is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and CITIC Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Telecom Intern and Lundin Mining 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 Lundin Mining are associated (or correlated) with CITIC Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Telecom Intern has no effect on the direction of Lundin Mining i.e., Lundin Mining and CITIC Telecom go up and down completely randomly.

Pair Corralation between Lundin Mining and CITIC Telecom

Assuming the 90 days horizon Lundin Mining is expected to generate 5.99 times less return on investment than CITIC Telecom. But when comparing it to its historical volatility, Lundin Mining is 3.02 times less risky than CITIC Telecom. It trades about 0.04 of its potential returns per unit of risk. CITIC Telecom International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4.09  in CITIC Telecom International on September 28, 2024 and sell it today you would earn a total of  22.91  from holding CITIC Telecom International or generate 560.15% return on investment over 90 days.

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

Lundin Mining  vs.  CITIC Telecom International

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CITIC Telecom Intern

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Telecom International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CITIC Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lundin Mining and CITIC Telecom

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

The idea behind Lundin Mining and CITIC Telecom International 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.