Correlation Between First Quantum and Lundin Mining

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

By analyzing existing cross correlation between First Quantum Minerals and Lundin Mining, you can compare the effects of market volatilities on First Quantum 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 First Quantum with a short position of Lundin Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Quantum and Lundin Mining.

Diversification Opportunities for First Quantum and Lundin Mining

0.87

Correlation Coefficient

First Quantum  Lundin Mining

Very poor diversification

The 3 months correlation between First and Lundin is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Quantum Minerals and Lundin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining and First Quantum 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 First Quantum Minerals 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 First Quantum i.e., First Quantum and Lundin Mining go up and down completely randomly.

Pair Corralation between First Quantum and Lundin Mining

Assuming the 90 days horizon First Quantum Minerals is expected to under-perform the Lundin Mining. In addition to that, First Quantum is 1.38 times more volatile than Lundin Mining. It trades about -0.06 of its total potential returns per unit of risk. Lundin Mining is currently generating about -0.02 per unit of volatility. If you would invest  1,575  in Lundin Mining on March 7, 2024 and sell it today you would lose (33.00) from holding Lundin Mining or give up 2.1% of portfolio value over 90 days.

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

First Quantum Minerals  vs.  Lundin Mining

First Quantum Minerals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Lundin Mining

Risk-Adjusted Performance

13 of 100

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 unfluctuating basic indicators, Lundin Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Quantum and Lundin Mining

The main advantage of trading using opposite First Quantum and Lundin Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Quantum 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 First Quantum Minerals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.