Correlation Between Imperial Metals and Lundin Mining

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

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

Diversification Opportunities for Imperial Metals and Lundin Mining

0.83

Correlation Coefficient

Imperial Metals  Lundin Mining

Very poor diversification

The 3 months correlation between Imperial and Lundin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Metals and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining and Imperial Metals 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 Imperial Metals 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 Imperial Metals i.e., Imperial Metals and Lundin Mining go up and down completely randomly.

Pair Corralation between Imperial Metals and Lundin Mining

Assuming the 90 days trading horizon Imperial Metals is expected to under-perform the Lundin Mining. In addition to that, Imperial Metals is 1.85 times more volatile than Lundin Mining. It trades about -0.14 of its total potential returns per unit of risk. Lundin Mining is currently generating about -0.19 per unit of volatility. If you would invest  1,378  in Lundin Mining on October 9, 2024 and sell it today you would lose (94.00) from holding Lundin Mining or give up 6.82% of portfolio value over 90 days.

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

Imperial Metals  vs.  Lundin Mining

Imperial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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 unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Imperial Metals and Lundin Mining

The main advantage of trading using opposite Imperial Metals and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Metals 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 Imperial Metals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.