Correlation Between Lucara Diamond and Triple Flag

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

Diversification Opportunities for Lucara Diamond and Triple Flag

0.62

Correlation Coefficient

Lucara Diamond  Triple Flag

Poor diversification

The 3 months correlation between Lucara and Triple is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lucara Diamond Corp and Triple Flag Precious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triple Flag Precious 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 Triple Flag. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triple Flag Precious has no effect on the direction of Lucara Diamond i.e., Lucara Diamond and Triple Flag go up and down completely randomly.

Pair Corralation between Lucara Diamond and Triple Flag

Assuming the 90 days horizon Lucara Diamond Corp is expected to under-perform the Triple Flag. In addition to that, Lucara Diamond is 1.71 times more volatile than Triple Flag Precious. It trades about -0.42 of its total potential returns per unit of risk. Triple Flag Precious is currently generating about -0.28 per unit of volatility. If you would invest  1,656  in Triple Flag Precious on October 8, 2024 and sell it today you would lose (138.00) from holding Triple Flag Precious or give up 8.33% 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.  Triple Flag Precious

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.

Triple Flag Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Triple Flag Precious has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Triple Flag is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lucara Diamond and Triple Flag

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

The idea behind Lucara Diamond Corp and Triple Flag Precious 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.