Correlation Between Aris Gold and Lucara Diamond

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

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

Diversification Opportunities for Aris Gold and Lucara Diamond

-0.76

Correlation Coefficient

Aris Gold  Lucara Diamond

Pay attention - limited upside

The 3 months correlation between Aris and Lucara is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Aris Gold Corp 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 Aris Gold 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 Aris Gold Corp 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 Aris Gold i.e., Aris Gold and Lucara Diamond go up and down completely randomly.

Pair Corralation between Aris Gold and Lucara Diamond

Assuming the 90 days trading horizon Aris Gold Corp is expected to generate 0.92 times more return on investment than Lucara Diamond. However, Aris Gold Corp is 1.09 times less risky than Lucara Diamond. It trades about 0.02 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.03 per unit of risk. If you would invest  505.00  in Aris Gold Corp on January 20, 2024 and sell it today you would earn a total of  33.00  from holding Aris Gold Corp or generate 6.53% return on investment over 90 days.

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

Aris Gold Corp  vs.  Lucara Diamond Corp

Aris Gold Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Gold Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Aris Gold displayed 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. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Aris Gold and Lucara Diamond

The main advantage of trading using opposite Aris Gold and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aris Gold 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 Aris Gold Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.