Correlation Between Lundin Gold and Lucara Diamond

Can any of the company-specific risk be diversified away by investing in both Lundin Gold and Lucara Diamond 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 Lundin Gold and Lucara Diamond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lundin Gold and Lucara Diamond Corp, you can compare the effects of market volatilities on Lundin Gold and Lucara Diamond 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 Lundin Gold with a short position of Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lundin Gold and Lucara Diamond.

Diversification Opportunities for Lundin Gold and Lucara Diamond

-0.43

Correlation Coefficient

Lundin Gold  Lucara Diamond

Very good diversification

The 3 months correlation between Lundin and Lucara is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Gold and Lucara Diamond Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucara Diamond Corp and Lundin Gold 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 Lundin Gold are associated (or correlated) with Lucara Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucara Diamond Corp has no effect on the direction of Lundin Gold i.e., Lundin Gold and Lucara Diamond go up and down completely randomly.

Pair Corralation between Lundin Gold and Lucara Diamond

Assuming the 90 days trading horizon Lundin Gold is expected to generate 0.61 times more return on investment than Lucara Diamond. However, Lundin Gold is 1.64 times less risky than Lucara Diamond. It trades about 0.19 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.08 per unit of risk. If you would invest  23,097  in Lundin Gold on December 30, 2024 and sell it today you would earn a total of  7,403  from holding Lundin Gold or generate 32.05% return on investment over 90 days.

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

Lundin Gold  vs.  Lucara Diamond Corp

Lundin Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lundin Gold are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Lundin Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lundin Gold and Lucara Diamond

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

The idea behind Lundin Gold and Lucara Diamond 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.