Correlation Between Westshore Terminals and Lundin Mining

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Can any of the company-specific risk be diversified away by investing in both Westshore Terminals 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 Westshore Terminals and Lundin Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westshore Terminals Investment and Lundin Mining, you can compare the effects of market volatilities on Westshore Terminals 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 Westshore Terminals with a short position of Lundin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westshore Terminals and Lundin Mining.

Diversification Opportunities for Westshore Terminals and Lundin Mining

-0.38
  Correlation Coefficient

Very good diversification

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

Pair Corralation between Westshore Terminals and Lundin Mining

Assuming the 90 days trading horizon Westshore Terminals Investment is expected to under-perform the Lundin Mining. But the stock apears to be less risky and, when comparing its historical volatility, Westshore Terminals Investment is 1.49 times less risky than Lundin Mining. The stock trades about -0.01 of its potential returns per unit of risk. The Lundin Mining is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,196  in Lundin Mining on December 30, 2023 and sell it today you would earn a total of  190.00  from holding Lundin Mining or generate 15.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Westshore Terminals Investment  vs.  Lundin Mining

 Performance 
       Timeline  
Westshore Terminals 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Westshore Terminals Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Westshore Terminals is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Lundin Mining 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Lundin Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Westshore Terminals and Lundin Mining Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Westshore Terminals and Lundin Mining

The main advantage of trading using opposite Westshore Terminals and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westshore Terminals 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 Westshore Terminals Investment 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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