Correlation Between Botnia Exploration and Lucara Diamond
Can any of the company-specific risk be diversified away by investing in both Botnia Exploration and Lucara Diamond 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 Botnia Exploration and Lucara Diamond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Botnia Exploration Holding and Lucara Diamond Corp, you can compare the effects of market volatilities on Botnia Exploration and Lucara Diamond 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 Botnia Exploration with a short position of Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Botnia Exploration and Lucara Diamond.
Diversification Opportunities for Botnia Exploration and Lucara Diamond
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Botnia and Lucara is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Botnia Exploration Holding and Lucara Diamond Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucara Diamond Corp and Botnia Exploration 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 Botnia Exploration Holding are associated (or correlated) with Lucara Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucara Diamond Corp has no effect on the direction of Botnia Exploration i.e., Botnia Exploration and Lucara Diamond go up and down completely randomly.
Pair Corralation between Botnia Exploration and Lucara Diamond
Assuming the 90 days trading horizon Botnia Exploration Holding is expected to generate 0.97 times more return on investment than Lucara Diamond. However, Botnia Exploration Holding is 1.03 times less risky than Lucara Diamond. It trades about -0.07 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.2 per unit of risk. If you would invest 1,315 in Botnia Exploration Holding on October 26, 2024 and sell it today you would lose (110.00) from holding Botnia Exploration Holding or give up 8.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Botnia Exploration Holding vs. Lucara Diamond Corp
Performance |
| Timeline |
| Botnia Exploration |
| Lucara Diamond Corp |
Botnia Exploration and Lucara Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Botnia Exploration and Lucara Diamond
The main advantage of trading using opposite Botnia Exploration and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Botnia Exploration position performs unexpectedly, Lucara Diamond 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 Lucara Diamond will offset losses from the drop in Lucara Diamond's long position.| Botnia Exploration vs. aXichem AB | Botnia Exploration vs. BE Group AB | Botnia Exploration vs. Arctic Gold Publ |
| Lucara Diamond vs. Africa Oil Corp | Lucara Diamond vs. Lundin Gold | Lucara Diamond vs. Lundin Mining | Lucara Diamond vs. Inwido AB |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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