Correlation Between Mountain Province and Lucara Diamond

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

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

Diversification Opportunities for Mountain Province and Lucara Diamond

0.0

Correlation Coefficient

Mountain Province  Lucara Diamond

Pay attention - limited upside

The 3 months correlation between Mountain and Lucara is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mountain Province Diamonds 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 Mountain Province 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 Mountain Province Diamonds 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 Mountain Province i.e., Mountain Province and Lucara Diamond go up and down completely randomly.

Pair Corralation between Mountain Province and Lucara Diamond

If you would invest  23.00  in Lucara Diamond Corp on September 30, 2024 and sell it today you would earn a total of  7.00  from holding Lucara Diamond Corp or generate 30.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.79%
Values	Daily Returns

Mountain Province Diamonds  vs.  Lucara Diamond Corp

Mountain Province

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lucara Diamond Corp

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Mountain Province and Lucara Diamond

The main advantage of trading using opposite Mountain Province and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mountain Province 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 Mountain Province Diamonds 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.