Correlation Between Lundin Mining and Lucara Diamond

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

Diversification Opportunities for Lundin Mining and Lucara Diamond

0.54

Correlation Coefficient

Lundin Mining  Lucara Diamond

Very weak diversification

The 3 months correlation between Lundin and Lucara is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lundin Mining 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 Mining 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 Mining 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 Mining i.e., Lundin Mining and Lucara Diamond go up and down completely randomly.

Pair Corralation between Lundin Mining and Lucara Diamond

Assuming the 90 days trading horizon Lundin Mining is expected to generate 0.63 times more return on investment than Lucara Diamond. However, Lundin Mining is 1.6 times less risky than Lucara Diamond. It trades about -0.05 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  9,330  in Lundin Mining on December 30, 2024 and sell it today you would lose (935.00) from holding Lundin Mining or give up 10.02% of portfolio value over 90 days.

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

Lundin Mining  vs.  Lucara Diamond Corp

Lundin Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lundin Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 Mining and Lucara Diamond

The main advantage of trading using opposite Lundin Mining and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lundin Mining 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 Mining 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.