Correlation Between Triple Flag and Lucara Diamond

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

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

Diversification Opportunities for Triple Flag and Lucara Diamond

0.59

Correlation Coefficient

Triple Flag  Lucara Diamond

Very weak diversification

The 3 months correlation between Triple and Lucara is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Triple Flag Precious 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 Triple Flag 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 Triple Flag Precious 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 Triple Flag i.e., Triple Flag and Lucara Diamond go up and down completely randomly.

Pair Corralation between Triple Flag and Lucara Diamond

Given the investment horizon of 90 days Triple Flag is expected to generate 1.65 times less return on investment than Lucara Diamond. But when comparing it to its historical volatility, Triple Flag Precious is 2.61 times less risky than Lucara Diamond. It trades about 0.03 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Lucara Diamond Corp on October 3, 2024 and sell it today you would lose (1.00) from holding Lucara Diamond Corp or give up 3.23% of portfolio value over 90 days.

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

Triple Flag Precious  vs.  Lucara Diamond Corp

Triple Flag Precious

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Triple Flag Precious has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 Triple Flag and Lucara Diamond

The main advantage of trading using opposite Triple Flag and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Triple Flag 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 Triple Flag Precious 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.