Correlation Between Lucara Diamond and McEwen Mining

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

Diversification Opportunities for Lucara Diamond and McEwen Mining

0.31

Correlation Coefficient

Lucara Diamond  McEwen Mining

Weak diversification

The 3 months correlation between Lucara and McEwen is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and McEwen Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McEwen 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 McEwen Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McEwen Mining has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and McEwen Mining go up and down completely randomly.

Pair Corralation between Lucara Diamond and McEwen Mining

Assuming the 90 days horizon Lucara Diamond Corp is expected to under-perform the McEwen Mining. In addition to that, Lucara Diamond is 1.51 times more volatile than McEwen Mining. It trades about -0.02 of its total potential returns per unit of risk. McEwen Mining is currently generating about 0.04 per unit of volatility. If you would invest  795.00  in McEwen Mining on December 21, 2024 and sell it today you would earn a total of  39.00  from holding McEwen Mining or generate 4.91% return on investment over 90 days.

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

Lucara Diamond Corp  vs.  McEwen Mining

Lucara Diamond Corp

Risk-Adjusted Performance

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 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.

McEwen Mining

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in McEwen Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, McEwen Mining may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lucara Diamond and McEwen Mining

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

The idea behind Lucara Diamond Corp and McEwen Mining 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.