Correlation Between Volvo AB and Lundin Mining
Can any of the company-specific risk be diversified away by investing in both Volvo AB 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 Volvo AB and Lundin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volvo AB Series and Lundin Mining Corp, you can compare the effects of market volatilities on Volvo AB 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 Volvo AB with a short position of Lundin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volvo AB and Lundin Mining.
Diversification Opportunities for Volvo AB and Lundin Mining
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Volvo and Lundin is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Volvo AB Series 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 Volvo AB 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 Volvo AB Series 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 Volvo AB i.e., Volvo AB and Lundin Mining go up and down completely randomly.
Pair Corralation between Volvo AB and Lundin Mining
Assuming the 90 days trading horizon Volvo AB is expected to generate 2.37 times less return on investment than Lundin Mining. But when comparing it to its historical volatility, Volvo AB Series is 1.91 times less risky than Lundin Mining. It trades about 0.04 of its potential returns per unit of risk. Lundin Mining Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,028 in Lundin Mining Corp on September 14, 2024 and sell it today you would earn a total of 1,900 from holding Lundin Mining Corp or generate 23.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volvo AB Series vs. Lundin Mining Corp
Performance |
| Timeline |
| Volvo AB Series |
| Lundin Mining Corp |
Volvo AB and Lundin Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volvo AB and Lundin Mining
The main advantage of trading using opposite Volvo AB and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volvo AB 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.| Volvo AB vs. Air Products Chemicals | Volvo AB vs. Porvair plc | Volvo AB vs. bet at home AG | Volvo AB vs. Flow Traders NV |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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