Correlation Between Lucara Diamond and KebNi AB

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

Diversification Opportunities for Lucara Diamond and KebNi AB

-0.48

Correlation Coefficient

Lucara Diamond  KebNi AB

Very good diversification

The 3 months correlation between Lucara and KebNi is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and KebNi AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KebNi 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 KebNi AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KebNi AB has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and KebNi AB go up and down completely randomly.

Pair Corralation between Lucara Diamond and KebNi AB

Assuming the 90 days trading horizon Lucara Diamond is expected to generate 1.92 times less return on investment than KebNi AB. But when comparing it to its historical volatility, Lucara Diamond Corp is 1.12 times less risky than KebNi AB. It trades about 0.01 of its potential returns per unit of risk. KebNi AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  110.00  in KebNi AB on September 26, 2024 and sell it today you would lose (2.00) from holding KebNi AB or give up 1.82% 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.  KebNi AB

Lucara Diamond Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lucara Diamond Corp are ranked lower than 2 (%) 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.

KebNi AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KebNi AB 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 KebNi AB

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

The idea behind Lucara Diamond Corp and KebNi 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.