Correlation Between Hecla Mining and Lucara Diamond

Can any of the company-specific risk be diversified away by investing in both Hecla 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 Hecla 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 Hecla Mining and Lucara Diamond Corp, you can compare the effects of market volatilities on Hecla 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 Hecla Mining with a short position of Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hecla Mining and Lucara Diamond.

Diversification Opportunities for Hecla Mining and Lucara Diamond

0.38

Correlation Coefficient

Hecla Mining  Lucara Diamond

Weak diversification

The 3 months correlation between Hecla and Lucara is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hecla Mining 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 Hecla 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 Hecla Mining 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 Hecla Mining i.e., Hecla Mining and Lucara Diamond go up and down completely randomly.

Pair Corralation between Hecla Mining and Lucara Diamond

Allowing for the 90-day total investment horizon Hecla Mining is expected to generate 1.09 times more return on investment than Lucara Diamond. However, Hecla Mining is 1.09 times more volatile than Lucara Diamond Corp. It trades about -0.23 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  587.00  in Hecla Mining on October 8, 2024 and sell it today you would lose (77.00) from holding Hecla Mining or give up 13.12% of portfolio value over 90 days.

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

Hecla Mining  vs.  Lucara Diamond Corp

Hecla Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hecla Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Lucara Diamond Corp

Risk-Adjusted Performance

1 of 100

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.

Pair Trading with Hecla Mining and Lucara Diamond

The main advantage of trading using opposite Hecla Mining and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hecla 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 Hecla Mining 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.