Correlation Between Lucara Diamond and Clifton Mining

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

Diversification Opportunities for Lucara Diamond and Clifton Mining

0.61

Correlation Coefficient

Lucara Diamond  Clifton Mining

Poor diversification

The 3 months correlation between Lucara and Clifton is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Clifton Mining Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clifton Mining 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 Clifton Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clifton Mining has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Clifton Mining go up and down completely randomly.

Pair Corralation between Lucara Diamond and Clifton Mining

Assuming the 90 days horizon Lucara Diamond Corp is expected to generate 0.45 times more return on investment than Clifton Mining. However, Lucara Diamond Corp is 2.21 times less risky than Clifton Mining. It trades about -0.15 of its potential returns per unit of risk. Clifton Mining Co is currently generating about -0.09 per unit of risk. If you would invest  33.00  in Lucara Diamond Corp on October 23, 2024 and sell it today you would lose (4.00) from holding Lucara Diamond Corp or give up 12.12% of portfolio value over 90 days.

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

Lucara Diamond Corp  vs.  Clifton Mining Co

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.

Clifton Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clifton Mining Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Lucara Diamond and Clifton Mining

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

The idea behind Lucara Diamond Corp and Clifton Mining Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.