Correlation Between Mekonomen and Lucara Diamond

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

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

Diversification Opportunities for Mekonomen and Lucara Diamond

0.39

Correlation Coefficient

Mekonomen  Lucara Diamond

Weak diversification

The 3 months correlation between Mekonomen and Lucara is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB 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 Mekonomen 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 Mekonomen AB 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 Mekonomen i.e., Mekonomen and Lucara Diamond go up and down completely randomly.

Pair Corralation between Mekonomen and Lucara Diamond

Assuming the 90 days trading horizon Mekonomen AB is expected to under-perform the Lucara Diamond. But the stock apears to be less risky and, when comparing its historical volatility, Mekonomen AB is 2.18 times less risky than Lucara Diamond. The stock trades about -0.04 of its potential returns per unit of risk. The Lucara Diamond Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  381.00  in Lucara Diamond Corp on September 23, 2024 and sell it today you would earn a total of  2.00  from holding Lucara Diamond Corp or generate 0.52% return on investment over 90 days.

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

Mekonomen AB  vs.  Lucara Diamond Corp

Mekonomen AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mekonomen AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mekonomen is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lucara Diamond Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lucara Diamond Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Lucara Diamond unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mekonomen and Lucara Diamond

The main advantage of trading using opposite Mekonomen and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mekonomen 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 Mekonomen AB 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.