Correlation Between Sandvik AB and Lundin Mining
Can any of the company-specific risk be diversified away by investing in both Sandvik AB 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 Sandvik AB and Lundin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB and Lundin Mining, you can compare the effects of market volatilities on Sandvik AB 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 Sandvik AB with a short position of Lundin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Lundin Mining.
Diversification Opportunities for Sandvik AB and Lundin Mining
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sandvik and Lundin is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining and Sandvik 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 Sandvik AB 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 Sandvik AB i.e., Sandvik AB and Lundin Mining go up and down completely randomly.
Pair Corralation between Sandvik AB and Lundin Mining
Assuming the 90 days trading horizon Sandvik AB is expected to under-perform the Lundin Mining. But the stock apears to be less risky and, when comparing its historical volatility, Sandvik AB is 1.93 times less risky than Lundin Mining. The stock trades about -0.08 of its potential returns per unit of risk. The Lundin Mining is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 10,440 in Lundin Mining on August 29, 2024 and sell it today you would earn a total of 400.00 from holding Lundin Mining or generate 3.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB vs. Lundin Mining
Performance |
| Timeline |
| Sandvik AB |
| Lundin Mining |
Sandvik AB and Lundin Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Lundin Mining
The main advantage of trading using opposite Sandvik AB and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB 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.| Sandvik AB vs. AB SKF | Sandvik AB vs. Alfa Laval AB | Sandvik AB vs. Atlas Copco AB | Sandvik AB vs. Boliden AB |
| Lundin Mining vs. Boliden AB | Lundin Mining vs. Lundin Gold | Lundin Mining vs. SSAB AB | Lundin Mining vs. AB SKF |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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