Correlation Between Lucara Diamond and Brixton Metals

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

Diversification Opportunities for Lucara Diamond and Brixton Metals

0.22

Correlation Coefficient

Lucara Diamond  Brixton Metals

Modest diversification

The 3 months correlation between Lucara and Brixton is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Brixton Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brixton 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 Brixton Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brixton Metals has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Brixton Metals go up and down completely randomly.

Pair Corralation between Lucara Diamond and Brixton Metals

Assuming the 90 days horizon Lucara Diamond Corp is expected to under-perform the Brixton Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Lucara Diamond Corp is 1.62 times less risky than Brixton Metals. The pink sheet trades about -0.42 of its potential returns per unit of risk. The Brixton Metals is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4.90  in Brixton Metals on October 8, 2024 and sell it today you would lose (0.30) from holding Brixton Metals or give up 6.12% of portfolio value over 90 days.

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

Lucara Diamond Corp  vs.  Brixton Metals

Lucara Diamond Corp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lucara Diamond Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lucara Diamond is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Brixton Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brixton Metals 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.

Pair Trading with Lucara Diamond and Brixton Metals

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

The idea behind Lucara Diamond Corp and Brixton 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.