Correlation Between International Petroleum and Lundin Mining

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

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

Diversification Opportunities for International Petroleum and Lundin Mining

-0.38

Correlation Coefficient

International Petroleum  Lundin Mining

Very good diversification

The 3 months correlation between International and Lundin is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding International Petroleum Corp and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining and International Petroleum 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 International Petroleum Corp 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 International Petroleum i.e., International Petroleum and Lundin Mining go up and down completely randomly.

Pair Corralation between International Petroleum and Lundin Mining

Assuming the 90 days trading horizon International Petroleum Corp is expected to under-perform the Lundin Mining. But the stock apears to be less risky and, when comparing its historical volatility, International Petroleum Corp is 1.24 times less risky than Lundin Mining. The stock trades about -0.09 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  10,302  in Lundin Mining on September 1, 2024 and sell it today you would earn a total of  358.00  from holding Lundin Mining or generate 3.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

International Petroleum Corp  vs.  Lundin Mining

International Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Lundin Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lundin Mining is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with International Petroleum and Lundin Mining

The main advantage of trading using opposite International Petroleum and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Petroleum 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 International Petroleum Corp and Lundin Mining 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..