Correlation Between Lucara Diamond and Starbreeze

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

Diversification Opportunities for Lucara Diamond and Starbreeze

-0.05

Correlation Coefficient

Lucara Diamond  Starbreeze

Good diversification

The 3 months correlation between Lucara and Starbreeze is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Starbreeze AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbreeze 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 Starbreeze. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbreeze AB has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Starbreeze go up and down completely randomly.

Pair Corralation between Lucara Diamond and Starbreeze

Assuming the 90 days trading horizon Lucara Diamond Corp is expected to generate 0.66 times more return on investment than Starbreeze. However, Lucara Diamond Corp is 1.51 times less risky than Starbreeze. It trades about 0.07 of its potential returns per unit of risk. Starbreeze AB is currently generating about -0.02 per unit of risk. If you would invest  248.00  in Lucara Diamond Corp on October 13, 2024 and sell it today you would earn a total of  98.00  from holding Lucara Diamond Corp or generate 39.52% return on investment over 90 days.

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

Lucara Diamond Corp  vs.  Starbreeze 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.

Starbreeze AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starbreeze 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 Starbreeze

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

The idea behind Lucara Diamond Corp and Starbreeze 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.