Correlation Between Lundin Mining and Sovereign Metals
Can any of the company-specific risk be diversified away by investing in both Lundin Mining and Sovereign 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 Sovereign Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lundin Mining Corp and Sovereign Metals, you can compare the effects of market volatilities on Lundin Mining and Sovereign 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 Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lundin Mining and Sovereign Metals.
Diversification Opportunities for Lundin Mining and Sovereign Metals
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lundin and Sovereign is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining Corp and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign 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 Corp are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Lundin Mining i.e., Lundin Mining and Sovereign Metals go up and down completely randomly.
Pair Corralation between Lundin Mining and Sovereign Metals
Assuming the 90 days trading horizon Lundin Mining is expected to generate 2.13 times less return on investment than Sovereign Metals. In addition to that, Lundin Mining is 1.1 times more volatile than Sovereign Metals. It trades about 0.05 of its total potential returns per unit of risk. Sovereign Metals is currently generating about 0.13 per unit of volatility. If you would invest 3,850 in Sovereign Metals on September 3, 2024 and sell it today you would earn a total of 200.00 from holding Sovereign Metals or generate 5.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lundin Mining Corp vs. Sovereign Metals
Performance |
| Timeline |
| Lundin Mining Corp |
| Sovereign Metals |
Lundin Mining and Sovereign Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lundin Mining and Sovereign Metals
The main advantage of trading using opposite Lundin Mining and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lundin Mining position performs unexpectedly, Sovereign 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.| Lundin Mining vs. CVS Health Corp | Lundin Mining vs. Optima Health plc | Lundin Mining vs. Primary Health Properties | Lundin Mining vs. Worldwide Healthcare Trust |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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