Correlation Between Lundin Mining and ALM Equity

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

By analyzing existing cross correlation between Lundin Mining and ALM Equity AB, you can compare the effects of market volatilities on Lundin Mining and ALM Equity 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 ALM Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lundin Mining and ALM Equity.

Diversification Opportunities for Lundin Mining and ALM Equity

-0.2

Correlation Coefficient

Lundin Mining  ALM Equity

Good diversification

The 3 months correlation between Lundin and ALM is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and ALM Equity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Equity AB 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 ALM Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Equity AB has no effect on the direction of Lundin Mining i.e., Lundin Mining and ALM Equity go up and down completely randomly.

Pair Corralation between Lundin Mining and ALM Equity

Assuming the 90 days trading horizon Lundin Mining is expected to generate 4.17 times more return on investment than ALM Equity. However, Lundin Mining is 4.17 times more volatile than ALM Equity AB. It trades about 0.05 of its potential returns per unit of risk. ALM Equity AB is currently generating about -0.08 per unit of risk. If you would invest  9,289  in Lundin Mining on September 16, 2024 and sell it today you would earn a total of  596.00  from holding Lundin Mining or generate 6.42% return on investment over 90 days.

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

Lundin Mining  vs.  ALM Equity AB

Lundin Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lundin Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ALM Equity AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALM Equity AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ALM Equity is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lundin Mining and ALM Equity

The main advantage of trading using opposite Lundin Mining and ALM Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lundin Mining position performs unexpectedly, ALM Equity 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 ALM Equity will offset losses from the drop in ALM Equity's long position.

The idea behind Lundin Mining and ALM Equity AB 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.