Correlation Between Lundin Mining and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both Lundin Mining and Freeport McMoRan 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 Freeport McMoRan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lundin Mining and Freeport McMoRan, you can compare the effects of market volatilities on Lundin Mining and Freeport McMoRan 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 Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lundin Mining and Freeport McMoRan.
Diversification Opportunities for Lundin Mining and Freeport McMoRan
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lundin and Freeport is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 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 are associated (or correlated) with Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of Lundin Mining i.e., Lundin Mining and Freeport McMoRan go up and down completely randomly.
Pair Corralation between Lundin Mining and Freeport McMoRan
Assuming the 90 days horizon Lundin Mining is expected to generate 1.4 times more return on investment than Freeport McMoRan. However, Lundin Mining is 1.4 times more volatile than Freeport McMoRan. It trades about -0.03 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.06 per unit of risk. If you would invest 906.00 in Lundin Mining on September 13, 2024 and sell it today you would lose (15.00) from holding Lundin Mining or give up 1.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lundin Mining vs. Freeport McMoRan
Performance |
| Timeline |
| Lundin Mining |
| Freeport McMoRan |
Lundin Mining and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lundin Mining and Freeport McMoRan
The main advantage of trading using opposite Lundin Mining and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lundin Mining position performs unexpectedly, Freeport McMoRan 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 Freeport McMoRan will offset losses from the drop in Freeport McMoRan's long position.| Lundin Mining vs. Southern Copper | Lundin Mining vs. Sandfire Resources Limited | Lundin Mining vs. Superior Plus Corp | Lundin Mining vs. NMI Holdings |
| Freeport McMoRan vs. Southern Copper | Freeport McMoRan vs. Sandfire Resources Limited | Freeport McMoRan vs. Superior Plus Corp | Freeport McMoRan 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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