Correlation Between KABE Group and Lucara Diamond

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

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

Diversification Opportunities for KABE Group and Lucara Diamond

-0.05

Correlation Coefficient

KABE Group  Lucara Diamond

Good diversification

The 3 months correlation between KABE and Lucara is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding KABE Group 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 KABE Group 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 KABE Group 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 KABE Group i.e., KABE Group and Lucara Diamond go up and down completely randomly.

Pair Corralation between KABE Group and Lucara Diamond

Assuming the 90 days trading horizon KABE Group AB is expected to generate 0.4 times more return on investment than Lucara Diamond. However, KABE Group AB is 2.48 times less risky than Lucara Diamond. It trades about 0.14 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.38 per unit of risk. If you would invest  29,300  in KABE Group AB on October 20, 2024 and sell it today you would earn a total of  800.00  from holding KABE Group AB or generate 2.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

KABE Group AB  vs.  Lucara Diamond Corp

KABE Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KABE Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, KABE Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with KABE Group and Lucara Diamond

The main advantage of trading using opposite KABE Group and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KABE Group 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 KABE Group 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.