Correlation Between Lucara Diamond and Alien Metals

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

Diversification Opportunities for Lucara Diamond and Alien Metals

-0.2

Correlation Coefficient

Lucara Diamond  Alien Metals

Good diversification

The 3 months correlation between Lucara and Alien is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Alien Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alien Metals 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 Alien Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alien Metals has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Alien Metals go up and down completely randomly.

Pair Corralation between Lucara Diamond and Alien Metals

Assuming the 90 days horizon Lucara Diamond Corp is expected to under-perform the Alien Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Lucara Diamond Corp is 56.48 times less risky than Alien Metals. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Alien Metals is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  0.26  in Alien Metals on October 23, 2024 and sell it today you would lose (0.17) from holding Alien Metals or give up 65.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Lucara Diamond Corp  vs.  Alien Metals

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Alien Metals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alien Metals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alien Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lucara Diamond and Alien Metals

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

The idea behind Lucara Diamond Corp and Alien Metals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.