Correlation Between Lundin Gold and China Merchants

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

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

Diversification Opportunities for Lundin Gold and China Merchants

0.78

Correlation Coefficient

Lundin Gold  China Merchants

Poor diversification

The 3 months correlation between Lundin and China is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Gold and China Merchants Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Port and Lundin Gold 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 Gold are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Port has no effect on the direction of Lundin Gold i.e., Lundin Gold and China Merchants go up and down completely randomly.

Pair Corralation between Lundin Gold and China Merchants

Assuming the 90 days trading horizon Lundin Gold is expected to generate 1.37 times less return on investment than China Merchants. In addition to that, Lundin Gold is 1.5 times more volatile than China Merchants Port. It trades about 0.08 of its total potential returns per unit of risk. China Merchants Port is currently generating about 0.17 per unit of volatility. If you would invest  129.00  in China Merchants Port on April 23, 2025 and sell it today you would earn a total of  30.00  from holding China Merchants Port or generate 23.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Lundin Gold  vs.  China Merchants Port

Lundin Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lundin Gold reported solid returns over the last few months and may actually be approaching a breakup point.

China Merchants Port

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Port are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Merchants reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lundin Gold and China Merchants

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

The idea behind Lundin Gold and China Merchants Port 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.