Correlation Between Lundin Mining and Arion Banki

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

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

Diversification Opportunities for Lundin Mining and Arion Banki

0.55

Correlation Coefficient

Lundin Mining  Arion Banki

Very weak diversification

The 3 months correlation between Lundin and Arion is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and Arion banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arion banki hf 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 Arion Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arion banki hf has no effect on the direction of Lundin Mining i.e., Lundin Mining and Arion Banki go up and down completely randomly.

Pair Corralation between Lundin Mining and Arion Banki

Assuming the 90 days trading horizon Lundin Mining is expected to generate 2.78 times less return on investment than Arion Banki. In addition to that, Lundin Mining is 1.49 times more volatile than Arion banki hf. It trades about 0.05 of its total potential returns per unit of risk. Arion banki hf is currently generating about 0.21 per unit of volatility. If you would invest  1,020  in Arion banki hf on September 15, 2024 and sell it today you would earn a total of  250.00  from holding Arion banki hf or generate 24.51% return on investment over 90 days.

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

Lundin Mining  vs.  Arion banki hf

Lundin Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lundin Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Arion banki hf

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Arion Banki unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lundin Mining and Arion Banki

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

The idea behind Lundin Mining and Arion banki hf 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.