Correlation Between Lucara Diamond and International Petroleum
Can any of the company-specific risk be diversified away by investing in both Lucara Diamond and International Petroleum 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 Lucara Diamond and International Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lucara Diamond Corp and International Petroleum, you can compare the effects of market volatilities on Lucara Diamond and International Petroleum 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 Lucara Diamond with a short position of International Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucara Diamond and International Petroleum.
Diversification Opportunities for Lucara Diamond and International Petroleum
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lucara and International is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and International Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Petroleum and Lucara Diamond 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 Lucara Diamond Corp are associated (or correlated) with International Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Petroleum has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and International Petroleum go up and down completely randomly.
Pair Corralation between Lucara Diamond and International Petroleum
Assuming the 90 days trading horizon Lucara Diamond Corp is expected to generate 1.72 times more return on investment than International Petroleum. However, Lucara Diamond is 1.72 times more volatile than International Petroleum. It trades about 0.08 of its potential returns per unit of risk. International Petroleum is currently generating about -0.02 per unit of risk. If you would invest 339.00 in Lucara Diamond Corp on August 28, 2024 and sell it today you would earn a total of 31.00 from holding Lucara Diamond Corp or generate 9.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lucara Diamond Corp vs. International Petroleum
Performance |
| Timeline |
| Lucara Diamond Corp |
| International Petroleum |
Lucara Diamond and International Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucara Diamond and International Petroleum
The main advantage of trading using opposite Lucara Diamond and International Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucara Diamond position performs unexpectedly, International Petroleum 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 International Petroleum will offset losses from the drop in International Petroleum's long position.| Lucara Diamond vs. Lundin Mining | Lucara Diamond vs. Africa Oil Corp | Lucara Diamond vs. International Petroleum | Lucara Diamond vs. Boliden AB |
| International Petroleum vs. SolTech Energy Sweden | International Petroleum vs. Minesto AB | International Petroleum vs. SaltX Technology Holding | International Petroleum vs. Impact Coatings publ |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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