Correlation Between Alien Metals and Lucara Diamond

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

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

Diversification Opportunities for Alien Metals and Lucara Diamond

-0.2

Correlation Coefficient

Alien Metals  Lucara Diamond

Good diversification

The 3 months correlation between Alien and Lucara is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals 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 Alien Metals 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 Alien Metals 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 Alien Metals i.e., Alien Metals and Lucara Diamond go up and down completely randomly.

Pair Corralation between Alien Metals and Lucara Diamond

Assuming the 90 days horizon Alien Metals is expected to generate 56.48 times more return on investment than Lucara Diamond. However, Alien Metals is 56.48 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 -0.15 per unit of risk. If you would invest  0.26  in Alien Metals on October 23, 2024 and sell it today you would lose (0.17) from holding Alien Metals or give up 65.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Alien Metals  vs.  Lucara Diamond Corp

Alien Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alien Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alien Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Lucara Diamond Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucara Diamond Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alien Metals and Lucara Diamond

The main advantage of trading using opposite Alien Metals and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alien Metals 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 Alien Metals 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.