Correlation Between Lucara Diamond and Gatos Silver

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

Diversification Opportunities for Lucara Diamond and Gatos Silver

0.52

Correlation Coefficient

Lucara Diamond  Gatos Silver

Very weak diversification

The 3 months correlation between Lucara and Gatos is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Gatos Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gatos Silver 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 Gatos Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gatos Silver has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Gatos Silver go up and down completely randomly.

Pair Corralation between Lucara Diamond and Gatos Silver

Assuming the 90 days horizon Lucara Diamond Corp is expected to generate 1.15 times more return on investment than Gatos Silver. However, Lucara Diamond is 1.15 times more volatile than Gatos Silver. It trades about -0.09 of its potential returns per unit of risk. Gatos Silver is currently generating about -0.15 per unit of risk. If you would invest  37.00  in Lucara Diamond Corp on October 23, 2024 and sell it today you would lose (8.00) from holding Lucara Diamond Corp or give up 21.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Lucara Diamond Corp  vs.  Gatos Silver

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.

Gatos Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatos Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Lucara Diamond and Gatos Silver

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

The idea behind Lucara Diamond Corp and Gatos Silver 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.