Correlation Between North Arrow and Lucara Diamond
Can any of the company-specific risk be diversified away by investing in both North Arrow 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 North Arrow and Lucara Diamond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North Arrow Minerals and Lucara Diamond Corp, you can compare the effects of market volatilities on North Arrow 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 North Arrow with a short position of Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Arrow and Lucara Diamond.
Diversification Opportunities for North Arrow and Lucara Diamond
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between North and Lucara is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding North Arrow Minerals 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 North Arrow 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 North Arrow Minerals 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 North Arrow i.e., North Arrow and Lucara Diamond go up and down completely randomly.
Pair Corralation between North Arrow and Lucara Diamond
Assuming the 90 days horizon North Arrow is expected to generate 3.55 times less return on investment than Lucara Diamond. In addition to that, North Arrow is 1.44 times more volatile than Lucara Diamond Corp. It trades about 0.02 of its total potential returns per unit of risk. Lucara Diamond Corp is currently generating about 0.12 per unit of volatility. If you would invest 38.00 in Lucara Diamond Corp on November 28, 2024 and sell it today you would earn a total of 3.00 from holding Lucara Diamond Corp or generate 7.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North Arrow Minerals vs. Lucara Diamond Corp
Performance |
| Timeline |
| North Arrow Minerals |
| Lucara Diamond Corp |
North Arrow and Lucara Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North Arrow and Lucara Diamond
The main advantage of trading using opposite North Arrow and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North Arrow 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.The idea behind North Arrow Minerals and Lucara Diamond Corp 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.| Lucara Diamond vs. Mountain Province Diamonds | Lucara Diamond vs. Lundin Gold | Lucara Diamond vs. Mandalay Resources Corp | Lucara Diamond vs. North Arrow Minerals |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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