Correlation Between Alzinova and Lucara Diamond

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

By analyzing existing cross correlation between Alzinova AB and Lucara Diamond Corp, you can compare the effects of market volatilities on Alzinova 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 Alzinova with a short position of Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alzinova and Lucara Diamond.

Diversification Opportunities for Alzinova and Lucara Diamond

0.13

Correlation Coefficient

Alzinova  Lucara Diamond

Average diversification

The 3 months correlation between Alzinova and Lucara is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Alzinova AB 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 Alzinova 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 Alzinova AB 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 Alzinova i.e., Alzinova and Lucara Diamond go up and down completely randomly.

Pair Corralation between Alzinova and Lucara Diamond

Assuming the 90 days trading horizon Alzinova AB is expected to generate 1.02 times more return on investment than Lucara Diamond. However, Alzinova is 1.02 times more volatile than Lucara Diamond Corp. It trades about 0.19 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about 0.08 per unit of risk. If you would invest  119.00  in Alzinova AB on September 23, 2024 and sell it today you would earn a total of  231.00  from holding Alzinova AB or generate 194.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alzinova AB  vs.  Lucara Diamond Corp

Alzinova AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alzinova AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alzinova is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Lucara Diamond Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lucara Diamond Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Lucara Diamond unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alzinova and Lucara Diamond

The main advantage of trading using opposite Alzinova and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alzinova 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 Alzinova AB 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.