Correlation Between Gemfields Group and North Bay

Can any of the company-specific risk be diversified away by investing in both Gemfields Group and North Bay 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 North Bay 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 North Bay Resources, you can compare the effects of market volatilities on Gemfields Group and North Bay 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 North Bay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gemfields Group and North Bay.

Diversification Opportunities for Gemfields Group and North Bay

0.36

Correlation Coefficient

Gemfields Group  North Bay

Weak diversification

The 3 months correlation between Gemfields and North is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Gemfields Group Limited and North Bay Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Bay Resources 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 North Bay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Bay Resources has no effect on the direction of Gemfields Group i.e., Gemfields Group and North Bay go up and down completely randomly.

Pair Corralation between Gemfields Group and North Bay

Assuming the 90 days horizon Gemfields Group is expected to generate 14.36 times less return on investment than North Bay. But when comparing it to its historical volatility, Gemfields Group Limited is 1.84 times less risky than North Bay. It trades about 0.01 of its potential returns per unit of risk. North Bay Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.07  in North Bay Resources on September 13, 2024 and sell it today you would earn a total of  0.01  from holding North Bay Resources or generate 14.29% return on investment over 90 days.

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

Gemfields Group Limited  vs.  North Bay Resources

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.

North Bay Resources

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North Bay Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, North Bay demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gemfields Group and North Bay

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

The idea behind Gemfields Group Limited and North Bay Resources 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.