Correlation Between Gap, and East Africa

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

By analyzing existing cross correlation between The Gap, and East Africa Metals, you can compare the effects of market volatilities on Gap, and East Africa 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 Gap, with a short position of East Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and East Africa.

Diversification Opportunities for Gap, and East Africa

-0.57

Correlation Coefficient

Gap,  East Africa

Excellent diversification

The 3 months correlation between Gap, and East is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and East Africa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Africa Metals and Gap, 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 The Gap, are associated (or correlated) with East Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Africa Metals has no effect on the direction of Gap, i.e., Gap, and East Africa go up and down completely randomly.

Pair Corralation between Gap, and East Africa

Considering the 90-day investment horizon Gap, is expected to generate 6.46 times less return on investment than East Africa. But when comparing it to its historical volatility, The Gap, is 9.64 times less risky than East Africa. It trades about 0.1 of its potential returns per unit of risk. East Africa Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8.22  in East Africa Metals on September 12, 2024 and sell it today you would earn a total of  2.78  from holding East Africa Metals or generate 33.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.72%
Values	Daily Returns

The Gap,  vs.  East Africa Metals

Gap,

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gap, and East Africa

The main advantage of trading using opposite Gap, and East Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, position performs unexpectedly, East Africa 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 East Africa will offset losses from the drop in East Africa's long position.

The idea behind The Gap, and East Africa Metals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.