Correlation Between Dow Jones and Lundin Mining
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Lundin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Lundin Mining, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Lundin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Lundin Mining.
Diversification Opportunities for Dow Jones and Lundin Mining
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Lundin is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining and Dow Jones 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 Dow Jones Industrial 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 has no effect on the direction of Dow Jones i.e., Dow Jones and Lundin Mining go up and down completely randomly.
Pair Corralation between Dow Jones and Lundin Mining
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.35 times less return on investment than Lundin Mining. But when comparing it to its historical volatility, Dow Jones Industrial is 3.7 times less risky than Lundin Mining. It trades about 0.08 of its potential returns per unit of risk. Lundin Mining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 520.00 in Lundin Mining on September 13, 2024 and sell it today you would earn a total of 371.00 from holding Lundin Mining or generate 71.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
Dow Jones Industrial vs. Lundin Mining
Performance |
| Timeline |
Dow Jones and Lundin Mining Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Lundin Mining
Pair trading matchups for Lundin Mining
Pair Trading with Dow Jones and Lundin Mining
The main advantage of trading using opposite Dow Jones and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. ChampionX | Dow Jones vs. Highway Holdings Limited | Dow Jones vs. Westinghouse Air Brake | Dow Jones vs. Cementos Pacasmayo SAA |
| Lundin Mining vs. Southern Copper | Lundin Mining vs. Sandfire Resources Limited | Lundin Mining vs. Superior Plus Corp | Lundin Mining vs. NMI Holdings |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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