Correlation Between Clifton Mining and Lucara Diamond

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Can any of the company-specific risk be diversified away by investing in both Clifton Mining 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 Clifton Mining and Lucara Diamond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clifton Mining Co and Lucara Diamond Corp, you can compare the effects of market volatilities on Clifton Mining 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 Clifton Mining with a short position of Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clifton Mining and Lucara Diamond.

Diversification Opportunities for Clifton Mining and Lucara Diamond

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Clifton and Lucara is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Clifton Mining Co 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 Clifton Mining 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 Clifton Mining Co 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 Clifton Mining i.e., Clifton Mining and Lucara Diamond go up and down completely randomly.

Pair Corralation between Clifton Mining and Lucara Diamond

Given the investment horizon of 90 days Clifton Mining Co is expected to generate 2.83 times more return on investment than Lucara Diamond. However, Clifton Mining is 2.83 times more volatile than Lucara Diamond Corp. It trades about -0.11 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.42 per unit of risk. If you would invest  5.00  in Clifton Mining Co on October 8, 2024 and sell it today you would lose (1.00) from holding Clifton Mining Co or give up 20.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Clifton Mining Co  vs.  Lucara Diamond Corp

 Performance 
       Timeline  
Clifton Mining 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Clifton Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
Lucara Diamond Corp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Lucara Diamond Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lucara Diamond is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Clifton Mining and Lucara Diamond Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Clifton Mining and Lucara Diamond

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

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