Correlation Between Lundin Mining and Skandinaviska Enskilda

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

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

Diversification Opportunities for Lundin Mining and Skandinaviska Enskilda

-0.6

Correlation Coefficient

Lundin Mining  Skandinaviska Enskilda

Excellent diversification

The 3 months correlation between Lundin and Skandinaviska is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining and Skandinaviska Enskilda Banken in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skandinaviska Enskilda 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 Skandinaviska Enskilda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skandinaviska Enskilda has no effect on the direction of Lundin Mining i.e., Lundin Mining and Skandinaviska Enskilda go up and down completely randomly.

Pair Corralation between Lundin Mining and Skandinaviska Enskilda

Assuming the 90 days trading horizon Lundin Mining is expected to generate 2.0 times more return on investment than Skandinaviska Enskilda. However, Lundin Mining is 2.0 times more volatile than Skandinaviska Enskilda Banken. It trades about 0.09 of its potential returns per unit of risk. Skandinaviska Enskilda Banken is currently generating about -0.02 per unit of risk. If you would invest  9,080  in Lundin Mining on September 12, 2024 and sell it today you would earn a total of  1,250  from holding Lundin Mining or generate 13.77% return on investment over 90 days.

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

Lundin Mining  vs.  Skandinaviska Enskilda Banken

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.

Skandinaviska Enskilda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skandinaviska Enskilda Banken has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Skandinaviska Enskilda is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lundin Mining and Skandinaviska Enskilda

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

The idea behind Lundin Mining and Skandinaviska Enskilda Banken 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.