Correlation Between Boliden AB and Lundin Gold
Can any of the company-specific risk be diversified away by investing in both Boliden AB and Lundin Gold 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 Boliden AB and Lundin Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boliden AB and Lundin Gold, you can compare the effects of market volatilities on Boliden AB and Lundin Gold 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 Boliden AB with a short position of Lundin Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boliden AB and Lundin Gold.
Diversification Opportunities for Boliden AB and Lundin Gold
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Boliden and Lundin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Boliden AB and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold and Boliden 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 Boliden AB are associated (or correlated) with Lundin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Gold has no effect on the direction of Boliden AB i.e., Boliden AB and Lundin Gold go up and down completely randomly.
Pair Corralation between Boliden AB and Lundin Gold
Assuming the 90 days trading horizon Boliden AB is expected to generate 2.7 times less return on investment than Lundin Gold. But when comparing it to its historical volatility, Boliden AB is 1.44 times less risky than Lundin Gold. It trades about 0.02 of its potential returns per unit of risk. Lundin Gold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 25,491 in Lundin Gold on October 26, 2024 and sell it today you would earn a total of 1,009 from holding Lundin Gold or generate 3.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Boliden AB vs. Lundin Gold
Performance |
| Timeline |
| Boliden AB |
| Lundin Gold |
Boliden AB and Lundin Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boliden AB and Lundin Gold
The main advantage of trading using opposite Boliden AB and Lundin Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boliden AB position performs unexpectedly, Lundin Gold 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 Gold will offset losses from the drop in Lundin Gold's long position.| Boliden AB vs. Sandvik AB | Boliden AB vs. AB SKF | Boliden AB vs. Alfa Laval AB | Boliden AB vs. AB Electrolux |
| Lundin Gold vs. Lundin Mining | Lundin Gold vs. Africa Oil Corp | Lundin Gold vs. International Petroleum | Lundin Gold vs. Boliden AB |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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