Correlation Between Lucara Diamond and Lundin Gold
Can any of the company-specific risk be diversified away by investing in both Lucara Diamond and Lundin Gold 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 Lundin Gold 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 Lundin Gold, you can compare the effects of market volatilities on Lucara Diamond and Lundin Gold 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 Lundin Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucara Diamond and Lundin Gold.
Diversification Opportunities for Lucara Diamond and Lundin Gold
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lucara and Lundin is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Lundin Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Gold 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 Lundin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Gold has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Lundin Gold go up and down completely randomly.
Pair Corralation between Lucara Diamond and Lundin Gold
Assuming the 90 days trading horizon Lucara Diamond Corp is expected to under-perform the Lundin Gold. In addition to that, Lucara Diamond is 1.3 times more volatile than Lundin Gold. It trades about -0.1 of its total potential returns per unit of risk. Lundin Gold is currently generating about 0.04 per unit of volatility. If you would invest 25,491 in Lundin Gold on October 26, 2024 and sell it today you would earn a total of 1,009 from holding Lundin Gold or generate 3.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.31% |
| Values | Daily Returns |
Lucara Diamond Corp vs. Lundin Gold
Performance |
| Timeline |
| Lucara Diamond Corp |
| Lundin Gold |
Lucara Diamond and Lundin Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lucara Diamond and Lundin Gold
The main advantage of trading using opposite Lucara Diamond and Lundin Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucara Diamond position performs unexpectedly, Lundin Gold 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 Gold will offset losses from the drop in Lundin Gold's long position.| Lucara Diamond vs. Africa Oil Corp | Lucara Diamond vs. Lundin Gold | Lucara Diamond vs. Lundin Mining | Lucara Diamond vs. Inwido AB |
| Lundin Gold vs. Lundin Mining | Lundin Gold vs. Africa Oil Corp | Lundin Gold vs. International Petroleum | Lundin Gold vs. Boliden 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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