Correlation Between Lucara Diamond and Alpcot Holding

Can any of the company-specific risk be diversified away by investing in both Lucara Diamond and Alpcot Holding 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 Alpcot Holding 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 Alpcot Holding AB, you can compare the effects of market volatilities on Lucara Diamond and Alpcot Holding 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 Alpcot Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lucara Diamond and Alpcot Holding.

Diversification Opportunities for Lucara Diamond and Alpcot Holding

-0.49

Correlation Coefficient

Lucara Diamond  Alpcot Holding

Very good diversification

The 3 months correlation between Lucara and Alpcot is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Alpcot Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpcot Holding 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 Alpcot Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpcot Holding AB has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Alpcot Holding go up and down completely randomly.

Pair Corralation between Lucara Diamond and Alpcot Holding

Assuming the 90 days trading horizon Lucara Diamond Corp is expected to generate 1.06 times more return on investment than Alpcot Holding. However, Lucara Diamond is 1.06 times more volatile than Alpcot Holding AB. It trades about 0.08 of its potential returns per unit of risk. Alpcot Holding AB is currently generating about -0.02 per unit of risk. If you would invest  250.00  in Lucara Diamond Corp on September 25, 2024 and sell it today you would earn a total of  109.00  from holding Lucara Diamond Corp or generate 43.6% return on investment over 90 days.

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

Lucara Diamond Corp  vs.  Alpcot Holding AB

Lucara Diamond Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lucara Diamond Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Lucara Diamond may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alpcot Holding AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lucara Diamond and Alpcot Holding

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

The idea behind Lucara Diamond Corp and Alpcot Holding 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.