Correlation Between Lundin Mining and Imperial Metals

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

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

Diversification Opportunities for Lundin Mining and Imperial Metals

0.85

Correlation Coefficient

Lundin Mining  Imperial Metals

Very poor diversification

The 3 months correlation between Lundin and Imperial is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and Imperial Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Metals 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 Imperial Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Metals has no effect on the direction of Lundin Mining i.e., Lundin Mining and Imperial Metals go up and down completely randomly.

Pair Corralation between Lundin Mining and Imperial Metals

Assuming the 90 days trading horizon Lundin Mining is expected to generate 1.01 times more return on investment than Imperial Metals. However, Lundin Mining is 1.01 times more volatile than Imperial Metals. It trades about 0.04 of its potential returns per unit of risk. Imperial Metals is currently generating about -0.02 per unit of risk. If you would invest  1,091  in Lundin Mining on October 24, 2024 and sell it today you would earn a total of  171.00  from holding Lundin Mining or generate 15.67% return on investment over 90 days.

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

Lundin Mining  vs.  Imperial Metals

Lundin Mining

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating 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.

Imperial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Imperial Metals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lundin Mining and Imperial Metals

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

The idea behind Lundin Mining and Imperial Metals 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.