Correlation Between Aberforth Smaller and Lundin Mining

Can any of the company-specific risk be diversified away by investing in both Aberforth Smaller 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 Aberforth Smaller and Lundin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aberforth Smaller Companies and Lundin Mining Corp, you can compare the effects of market volatilities on Aberforth Smaller 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 Aberforth Smaller with a short position of Lundin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberforth Smaller and Lundin Mining.

Diversification Opportunities for Aberforth Smaller and Lundin Mining

-0.42

Correlation Coefficient

Aberforth Smaller  Lundin Mining

Very good diversification

The 3 months correlation between Aberforth and Lundin is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Aberforth Smaller Companies 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 Aberforth Smaller 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 Aberforth Smaller Companies 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 Aberforth Smaller i.e., Aberforth Smaller and Lundin Mining go up and down completely randomly.

Pair Corralation between Aberforth Smaller and Lundin Mining

Assuming the 90 days trading horizon Aberforth Smaller Companies is expected to under-perform the Lundin Mining. But the stock apears to be less risky and, when comparing its historical volatility, Aberforth Smaller Companies is 2.59 times less risky than Lundin Mining. The stock trades about -0.1 of its potential returns per unit of risk. The Lundin Mining Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,266  in Lundin Mining Corp on September 14, 2024 and sell it today you would earn a total of  662.00  from holding Lundin Mining Corp or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aberforth Smaller Companies  vs.  Lundin Mining Corp

Aberforth Smaller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberforth Smaller Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Lundin Mining Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Mining Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Lundin Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aberforth Smaller and Lundin Mining

The main advantage of trading using opposite Aberforth Smaller and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberforth Smaller 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.

The idea behind Aberforth Smaller Companies and Lundin Mining Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.