Correlation Between Lundin Mining and Tsingtao Brewery

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

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

Diversification Opportunities for Lundin Mining and Tsingtao Brewery

0.06

Correlation Coefficient

Lundin Mining  Tsingtao Brewery

Significant diversification

The 3 months correlation between Lundin and Tsingtao is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of Lundin Mining i.e., Lundin Mining and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Lundin Mining and Tsingtao Brewery

Assuming the 90 days horizon Lundin Mining is expected to under-perform the Tsingtao Brewery. In addition to that, Lundin Mining is 1.21 times more volatile than Tsingtao Brewery. It trades about -0.26 of its total potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.34 per unit of volatility. If you would invest  577.00  in Tsingtao Brewery on September 25, 2024 and sell it today you would earn a total of  83.00  from holding Tsingtao Brewery or generate 14.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Lundin Mining  vs.  Tsingtao Brewery

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 nearly stable basic indicators, Lundin Mining is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tsingtao Brewery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Tsingtao Brewery exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lundin Mining and Tsingtao Brewery

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

The idea behind Lundin Mining and Tsingtao Brewery 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.