Correlation Between Lundin Mining and MilDef Group

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

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

Diversification Opportunities for Lundin Mining and MilDef Group

0.43

Correlation Coefficient

Lundin Mining  MilDef Group

Very weak diversification

The 3 months correlation between Lundin and MilDef is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and MilDef Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MilDef Group 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 MilDef Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MilDef Group AB has no effect on the direction of Lundin Mining i.e., Lundin Mining and MilDef Group go up and down completely randomly.

Pair Corralation between Lundin Mining and MilDef Group

Assuming the 90 days trading horizon Lundin Mining is expected to generate 0.81 times more return on investment than MilDef Group. However, Lundin Mining is 1.23 times less risky than MilDef Group. It trades about 0.06 of its potential returns per unit of risk. MilDef Group AB is currently generating about 0.04 per unit of risk. If you would invest  6,001  in Lundin Mining on September 12, 2024 and sell it today you would earn a total of  4,329  from holding Lundin Mining or generate 72.14% return on investment over 90 days.

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

Lundin Mining  vs.  MilDef Group AB

Lundin Mining

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Mining are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lundin Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

MilDef Group AB

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MilDef Group AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, MilDef Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lundin Mining and MilDef Group

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

The idea behind Lundin Mining and MilDef Group 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.