Correlation Between Neometals and Lundin Mining

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

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

Diversification Opportunities for Neometals and Lundin Mining

0.36

Correlation Coefficient

Neometals  Lundin Mining

Weak diversification

The 3 months correlation between Neometals and Lundin is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Neometals and Lundin Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining Corp and Neometals 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 Neometals are associated (or correlated) with Lundin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Mining Corp has no effect on the direction of Neometals i.e., Neometals and Lundin Mining go up and down completely randomly.

Pair Corralation between Neometals and Lundin Mining

Assuming the 90 days trading horizon Neometals is expected to under-perform the Lundin Mining. In addition to that, Neometals is 1.7 times more volatile than Lundin Mining Corp. It trades about -0.02 of its total potential returns per unit of risk. Lundin Mining Corp is currently generating about 0.02 per unit of volatility. If you would invest  10,380  in Lundin Mining Corp on August 31, 2024 and sell it today you would earn a total of  200.00  from holding Lundin Mining Corp or generate 1.93% return on investment over 90 days.

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

Neometals  vs.  Lundin Mining Corp

Neometals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neometals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Lundin Mining Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Mining Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lundin Mining is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Neometals and Lundin Mining

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

The idea behind Neometals and Lundin 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.