Correlation Between Reliance Industries and Lundin Mining

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

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

Diversification Opportunities for Reliance Industries and Lundin Mining

0.39

Correlation Coefficient

Reliance Industries  Lundin Mining

Weak diversification

The 3 months correlation between Reliance and Lundin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd 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 Reliance Industries 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 Reliance Industries Ltd 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 Reliance Industries i.e., Reliance Industries and Lundin Mining go up and down completely randomly.

Pair Corralation between Reliance Industries and Lundin Mining

Assuming the 90 days trading horizon Reliance Industries Ltd is expected to generate 0.5 times more return on investment than Lundin Mining. However, Reliance Industries Ltd is 2.01 times less risky than Lundin Mining. It trades about 0.05 of its potential returns per unit of risk. Lundin Mining Corp is currently generating about -0.04 per unit of risk. If you would invest  5,670  in Reliance Industries Ltd on December 30, 2024 and sell it today you would earn a total of  220.00  from holding Reliance Industries Ltd or generate 3.88% return on investment over 90 days.

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

Reliance Industries Ltd  vs.  Lundin Mining Corp

Reliance Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Industries Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Reliance Industries is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lundin Mining Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lundin Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Reliance Industries and Lundin Mining

The main advantage of trading using opposite Reliance Industries and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries Ltd 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.