Correlation Between Puma Exploration and Lucara Diamond

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

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

Diversification Opportunities for Puma Exploration and Lucara Diamond

0.01

Correlation Coefficient

Puma Exploration  Lucara Diamond

Significant diversification

The 3 months correlation between Puma and Lucara is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Puma Exploration 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 Puma Exploration 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 Puma Exploration 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 Puma Exploration i.e., Puma Exploration and Lucara Diamond go up and down completely randomly.

Pair Corralation between Puma Exploration and Lucara Diamond

Assuming the 90 days horizon Puma Exploration is expected to generate 3.16 times more return on investment than Lucara Diamond. However, Puma Exploration is 3.16 times more volatile than Lucara Diamond Corp. It trades about -0.04 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.22 per unit of risk. If you would invest  6.00  in Puma Exploration on September 29, 2024 and sell it today you would lose (1.00) from holding Puma Exploration or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Puma Exploration  vs.  Lucara Diamond Corp

Puma Exploration

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Exploration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Puma Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

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 Puma Exploration and Lucara Diamond

The main advantage of trading using opposite Puma Exploration and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Puma Exploration 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 Puma Exploration 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.