Correlation Between Optima Health and Lundin Mining
Can any of the company-specific risk be diversified away by investing in both Optima Health 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 Optima Health and Lundin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Optima Health plc and Lundin Mining Corp, you can compare the effects of market volatilities on Optima Health 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 Optima Health with a short position of Lundin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Optima Health and Lundin Mining.
Diversification Opportunities for Optima Health and Lundin Mining
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Optima and Lundin is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Optima Health plc 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 Optima Health 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 Optima Health plc 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 Optima Health i.e., Optima Health and Lundin Mining go up and down completely randomly.
Pair Corralation between Optima Health and Lundin Mining
Assuming the 90 days trading horizon Optima Health is expected to generate 2.12 times less return on investment than Lundin Mining. But when comparing it to its historical volatility, Optima Health plc is 2.01 times less risky than Lundin Mining. It trades about 0.05 of its potential returns per unit of risk. Lundin Mining Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,115 in Lundin Mining Corp on September 3, 2024 and sell it today you would earn a total of 4,640 from holding Lundin Mining Corp or generate 75.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 9.62% |
| Values | Daily Returns |
Optima Health plc vs. Lundin Mining Corp
Performance |
| Timeline |
| Optima Health plc |
| Lundin Mining Corp |
Optima Health and Lundin Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Optima Health and Lundin Mining
The main advantage of trading using opposite Optima Health and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optima Health 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.| Optima Health vs. Vulcan Materials Co | Optima Health vs. Morgan Advanced Materials | Optima Health vs. Verizon Communications | Optima Health vs. Zoom Video Communications |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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