Correlation Between Liberty Gold and Lundin Gold

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

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

Diversification Opportunities for Liberty Gold and Lundin Gold

0.69

Correlation Coefficient

Liberty Gold  Lundin Gold

Poor diversification

The 3 months correlation between Liberty and Lundin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Gold Corp and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold and Liberty Gold 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 Liberty Gold Corp 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 Liberty Gold i.e., Liberty Gold and Lundin Gold go up and down completely randomly.

Pair Corralation between Liberty Gold and Lundin Gold

Assuming the 90 days horizon Liberty Gold Corp is expected to under-perform the Lundin Gold. In addition to that, Liberty Gold is 1.75 times more volatile than Lundin Gold. It trades about -0.03 of its total potential returns per unit of risk. Lundin Gold is currently generating about 0.07 per unit of volatility. If you would invest  1,048  in Lundin Gold on October 12, 2024 and sell it today you would earn a total of  1,094  from holding Lundin Gold or generate 104.39% return on investment over 90 days.

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

Liberty Gold Corp  vs.  Lundin Gold

Liberty Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lundin Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Liberty Gold and Lundin Gold

The main advantage of trading using opposite Liberty Gold and Lundin Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Gold 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 Liberty Gold Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.