Correlation Between Lundin Mining and Capstone Mining

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

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

Diversification Opportunities for Lundin Mining and Capstone Mining

0.45

Correlation Coefficient

Lundin Mining  Capstone Mining

Very weak diversification

The 3 months correlation between Lundin and Capstone is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining Corp 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 Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of Lundin Mining i.e., Lundin Mining and Capstone Mining go up and down completely randomly.

Pair Corralation between Lundin Mining and Capstone Mining

Assuming the 90 days trading horizon Lundin Mining is expected to generate 0.73 times more return on investment than Capstone Mining. However, Lundin Mining is 1.38 times less risky than Capstone Mining. It trades about 0.0 of its potential returns per unit of risk. Capstone Mining Corp is currently generating about -0.04 per unit of risk. If you would invest  1,221  in Lundin Mining on December 30, 2024 and sell it today you would lose (29.00) from holding Lundin Mining or give up 2.38% of portfolio value over 90 days.

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

Lundin Mining  vs.  Capstone Mining Corp

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 very healthy basic indicators, Lundin Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Capstone Mining Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capstone Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal 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 Lundin Mining and Capstone Mining

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

The idea behind Lundin Mining and Capstone Mining Corp 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.