Correlation Between Lucara Diamond and Norra Metals

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

Diversification Opportunities for Lucara Diamond and Norra Metals

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Correlation Coefficient

Lucara Diamond  Norra Metals

Pay attention - limited upside

The 3 months correlation between Lucara and Norra is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Norra Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norra Metals Corp 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 Norra Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norra Metals Corp has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Norra Metals go up and down completely randomly.

Pair Corralation between Lucara Diamond and Norra Metals

Assuming the 90 days horizon Lucara Diamond Corp is expected to under-perform the Norra Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Lucara Diamond Corp is 16.98 times less risky than Norra Metals. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Norra Metals Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.96  in Norra Metals Corp on October 26, 2024 and sell it today you would lose (0.96) from holding Norra Metals Corp or give up 48.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Lucara Diamond Corp  vs.  Norra Metals Corp

Lucara Diamond Corp

Risk-Adjusted Performance

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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.

Norra Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norra Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Norra Metals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lucara Diamond and Norra Metals

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

The idea behind Lucara Diamond Corp and Norra Metals Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.