Correlation Between Syrah Resources and Lucara Diamond

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

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

Diversification Opportunities for Syrah Resources and Lucara Diamond

0.41

Correlation Coefficient

Syrah Resources  Lucara Diamond

Very weak diversification

The 3 months correlation between Syrah and Lucara is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Syrah Resources Limited 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 Syrah Resources 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 Syrah Resources Limited 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 Syrah Resources i.e., Syrah Resources and Lucara Diamond go up and down completely randomly.

Pair Corralation between Syrah Resources and Lucara Diamond

Assuming the 90 days horizon Syrah Resources Limited is expected to under-perform the Lucara Diamond. In addition to that, Syrah Resources is 1.59 times more volatile than Lucara Diamond Corp. It trades about -0.03 of its total potential returns per unit of risk. Lucara Diamond Corp is currently generating about 0.0 per unit of volatility. If you would invest  47.00  in Lucara Diamond Corp on October 21, 2024 and sell it today you would lose (18.00) from holding Lucara Diamond Corp or give up 38.3% of portfolio value over 90 days.

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

Syrah Resources Limited  vs.  Lucara Diamond Corp

Syrah Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Syrah Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Syrah Resources 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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Syrah Resources and Lucara Diamond

The main advantage of trading using opposite Syrah Resources and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Syrah Resources 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 Syrah Resources Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.