Correlation Between Lucara Diamond and 4C Group

Can any of the company-specific risk be diversified away by investing in both Lucara Diamond and 4C Group 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 Lucara Diamond and 4C Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lucara Diamond Corp and 4C Group AB, you can compare the effects of market volatilities on Lucara Diamond and 4C Group 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 Lucara Diamond with a short position of 4C Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucara Diamond and 4C Group.

Diversification Opportunities for Lucara Diamond and 4C Group

-0.45

Correlation Coefficient

Lucara Diamond  4C Group

Very good diversification

The 3 months correlation between Lucara and 4C Group is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and 4C Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 4C Group AB and Lucara Diamond 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 Lucara Diamond Corp are associated (or correlated) with 4C Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 4C Group AB has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and 4C Group go up and down completely randomly.

Pair Corralation between Lucara Diamond and 4C Group

Assuming the 90 days trading horizon Lucara Diamond Corp is expected to generate 0.83 times more return on investment than 4C Group. However, Lucara Diamond Corp is 1.2 times less risky than 4C Group. It trades about -0.37 of its potential returns per unit of risk. 4C Group AB is currently generating about -0.41 per unit of risk. If you would invest  394.00  in Lucara Diamond Corp on October 3, 2024 and sell it today you would lose (66.00) from holding Lucara Diamond Corp or give up 16.75% of portfolio value over 90 days.

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

Lucara Diamond Corp  vs.  4C Group AB

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 comparatively stable fundamental indicators, Lucara Diamond is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

4C Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 4C Group AB 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 basic 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 Lucara Diamond and 4C Group

The main advantage of trading using opposite Lucara Diamond and 4C Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lucara Diamond position performs unexpectedly, 4C Group 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 4C Group will offset losses from the drop in 4C Group's long position.

The idea behind Lucara Diamond Corp and 4C Group AB 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.