Correlation Between Lundin Mining and Sandfire Resources

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

By analyzing existing cross correlation between Lundin Mining and Sandfire Resources Limited, you can compare the effects of market volatilities on Lundin Mining and Sandfire Resources 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 Sandfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lundin Mining and Sandfire Resources.

Diversification Opportunities for Lundin Mining and Sandfire Resources

0.22

Correlation Coefficient

Lundin Mining  Sandfire Resources

Modest diversification

The 3 months correlation between Lundin and Sandfire is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Lundin Mining i.e., Lundin Mining and Sandfire Resources go up and down completely randomly.

Pair Corralation between Lundin Mining and Sandfire Resources

Assuming the 90 days horizon Lundin Mining is expected to under-perform the Sandfire Resources. In addition to that, Lundin Mining is 1.23 times more volatile than Sandfire Resources Limited. It trades about -0.08 of its total potential returns per unit of risk. Sandfire Resources Limited is currently generating about 0.2 per unit of volatility. If you would invest  600.00  in Sandfire Resources Limited on December 6, 2024 and sell it today you would earn a total of  55.00  from holding Sandfire Resources Limited or generate 9.17% return on investment over 90 days.

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

Lundin Mining  vs.  Sandfire Resources Limited

Lundin Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lundin Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sandfire Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sandfire Resources 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 Sandfire Resources

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

The idea behind Lundin Mining and Sandfire Resources Limited 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.