Correlation Between Gemfields Group and Azucar Minerals

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

By analyzing existing cross correlation between Gemfields Group Limited and Azucar Minerals, you can compare the effects of market volatilities on Gemfields Group and Azucar Minerals 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 Gemfields Group with a short position of Azucar Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gemfields Group and Azucar Minerals.

Diversification Opportunities for Gemfields Group and Azucar Minerals

-0.11

Correlation Coefficient

Gemfields Group  Azucar Minerals

Good diversification

The 3 months correlation between Gemfields and Azucar is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Gemfields Group Limited and Azucar Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azucar Minerals and Gemfields Group 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 Gemfields Group Limited are associated (or correlated) with Azucar Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azucar Minerals has no effect on the direction of Gemfields Group i.e., Gemfields Group and Azucar Minerals go up and down completely randomly.

Pair Corralation between Gemfields Group and Azucar Minerals

Assuming the 90 days horizon Gemfields Group is expected to generate 23.98 times less return on investment than Azucar Minerals. But when comparing it to its historical volatility, Gemfields Group Limited is 2.17 times less risky than Azucar Minerals. It trades about 0.01 of its potential returns per unit of risk. Azucar Minerals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Azucar Minerals on September 3, 2024 and sell it today you would earn a total of  0.68  from holding Azucar Minerals or generate 35.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Gemfields Group Limited  vs.  Azucar Minerals

Gemfields Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gemfields Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Gemfields Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Azucar Minerals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azucar Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, Azucar Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gemfields Group and Azucar Minerals

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

The idea behind Gemfields Group Limited and Azucar Minerals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.