Correlation Between Gemz Corp and First Colombia

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

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

Diversification Opportunities for Gemz Corp and First Colombia

-0.08

Correlation Coefficient

Gemz Corp  First Colombia

Good diversification

The 3 months correlation between Gemz and First is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Gemz Corp and First Colombia Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Colombia Gold and Gemz Corp 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 Gemz Corp are associated (or correlated) with First Colombia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Colombia Gold has no effect on the direction of Gemz Corp i.e., Gemz Corp and First Colombia go up and down completely randomly.

Pair Corralation between Gemz Corp and First Colombia

Given the investment horizon of 90 days Gemz Corp is expected to generate 42.31 times less return on investment than First Colombia. But when comparing it to its historical volatility, Gemz Corp is 13.7 times less risky than First Colombia. It trades about 0.09 of its potential returns per unit of risk. First Colombia Gold is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  0.01  in First Colombia Gold on September 18, 2024 and sell it today you would earn a total of  0.00  from holding First Colombia Gold or generate 0.0% return on investment over 90 days.

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

Gemz Corp  vs.  First Colombia Gold

Gemz Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gemz Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Gemz Corp reported solid returns over the last few months and may actually be approaching a breakup point.

First Colombia Gold

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Colombia Gold are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, First Colombia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gemz Corp and First Colombia

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

The idea behind Gemz Corp and First Colombia Gold 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.

Check out your portfolio center.

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.