Correlation Between Lucara Diamond and Gapwaves

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

Diversification Opportunities for Lucara Diamond and Gapwaves

-0.42

Correlation Coefficient

Lucara Diamond  Gapwaves

Very good diversification

The 3 months correlation between Lucara and Gapwaves is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Gapwaves AB Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gapwaves AB Series 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 Gapwaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gapwaves AB Series has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Gapwaves go up and down completely randomly.

Pair Corralation between Lucara Diamond and Gapwaves

Assuming the 90 days trading horizon Lucara Diamond Corp is expected to generate 0.34 times more return on investment than Gapwaves. However, Lucara Diamond Corp is 2.9 times less risky than Gapwaves. It trades about -0.05 of its potential returns per unit of risk. Gapwaves AB Series is currently generating about -0.09 per unit of risk. If you would invest  370.00  in Lucara Diamond Corp on September 27, 2024 and sell it today you would lose (11.00) from holding Lucara Diamond Corp or give up 2.97% 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.  Gapwaves AB Series

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.

Gapwaves AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gapwaves AB Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lucara Diamond and Gapwaves

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

The idea behind Lucara Diamond Corp and Gapwaves AB Series 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.