Correlation Between Lundin Gold and Sandvik AB

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

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

Diversification Opportunities for Lundin Gold and Sandvik AB

0.77

Correlation Coefficient

Lundin Gold  Sandvik AB

Poor diversification

The 3 months correlation between Lundin and Sandvik is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Gold and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB and Lundin 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 Lundin Gold are associated (or correlated) with Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB has no effect on the direction of Lundin Gold i.e., Lundin Gold and Sandvik AB go up and down completely randomly.

Pair Corralation between Lundin Gold and Sandvik AB

Assuming the 90 days trading horizon Lundin Gold is expected to generate 1.3 times more return on investment than Sandvik AB. However, Lundin Gold is 1.3 times more volatile than Sandvik AB. It trades about 0.19 of its potential returns per unit of risk. Sandvik AB is currently generating about 0.09 per unit of risk. If you would invest  23,097  in Lundin Gold on December 30, 2024 and sell it today you would earn a total of  7,403  from holding Lundin Gold or generate 32.05% return on investment over 90 days.

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

Lundin Gold  vs.  Sandvik AB

Lundin Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Gold are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Lundin Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sandvik AB

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sandvik AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sandvik AB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lundin Gold and Sandvik AB

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

The idea behind Lundin Gold and Sandvik AB 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.