Correlation Between Western Alaska and Gemfields Group

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

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

Diversification Opportunities for Western Alaska and Gemfields Group

0.26

Correlation Coefficient

Western Alaska  Gemfields Group

Modest diversification

The 3 months correlation between Western and Gemfields is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Western Alaska Minerals and Gemfields Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemfields Group and Western Alaska 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 Western Alaska Minerals are associated (or correlated) with Gemfields Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemfields Group has no effect on the direction of Western Alaska i.e., Western Alaska and Gemfields Group go up and down completely randomly.

Pair Corralation between Western Alaska and Gemfields Group

Assuming the 90 days horizon Western Alaska Minerals is expected to under-perform the Gemfields Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Western Alaska Minerals is 1.01 times less risky than Gemfields Group. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Gemfields Group Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Gemfields Group Limited on September 2, 2024 and sell it today you would lose (2.00) from holding Gemfields Group Limited or give up 16.67% of portfolio value over 90 days.

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

Western Alaska Minerals  vs.  Gemfields Group Limited

Western Alaska Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Western Alaska and Gemfields Group

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

The idea behind Western Alaska Minerals and Gemfields Group Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.