Correlation Between Lundin Mining and Norion Bank

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

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

Diversification Opportunities for Lundin Mining and Norion Bank

0.02

Correlation Coefficient

Lundin Mining  Norion Bank

Significant diversification

The 3 months correlation between Lundin and Norion is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and Norion Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norion Bank 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 Norion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norion Bank has no effect on the direction of Lundin Mining i.e., Lundin Mining and Norion Bank go up and down completely randomly.

Pair Corralation between Lundin Mining and Norion Bank

Assuming the 90 days trading horizon Lundin Mining is expected to generate 1.0 times more return on investment than Norion Bank. However, Lundin Mining is 1.0 times less risky than Norion Bank. It trades about 0.04 of its potential returns per unit of risk. Norion Bank is currently generating about -0.06 per unit of risk. If you would invest  10,520  in Lundin Mining on September 4, 2024 and sell it today you would earn a total of  150.00  from holding Lundin Mining or generate 1.43% return on investment over 90 days.

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

Lundin Mining  vs.  Norion Bank

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.

Norion Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norion Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Norion Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lundin Mining and Norion Bank

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

The idea behind Lundin Mining and Norion Bank 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.