Correlation Between Lundin Mining and Nordic Iron

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

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

Diversification Opportunities for Lundin Mining and Nordic Iron

-0.22

Correlation Coefficient

Lundin Mining  Nordic Iron

Very good diversification

The 3 months correlation between Lundin and Nordic is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and Nordic Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Iron Ore 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 Nordic Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Iron Ore has no effect on the direction of Lundin Mining i.e., Lundin Mining and Nordic Iron go up and down completely randomly.

Pair Corralation between Lundin Mining and Nordic Iron

Assuming the 90 days trading horizon Lundin Mining is expected to under-perform the Nordic Iron. But the stock apears to be less risky and, when comparing its historical volatility, Lundin Mining is 1.61 times less risky than Nordic Iron. The stock trades about -0.05 of its potential returns per unit of risk. The Nordic Iron Ore is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  476.00  in Nordic Iron Ore on December 2, 2024 and sell it today you would earn a total of  64.00  from holding Nordic Iron Ore or generate 13.45% return on investment over 90 days.

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

Lundin Mining  vs.  Nordic Iron Ore

Lundin Mining

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Nordic Iron Ore

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Lundin Mining and Nordic Iron

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

The idea behind Lundin Mining and Nordic Iron Ore 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.