Correlation Between Zoje Resources and GEM

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

By analyzing existing cross correlation between Zoje Resources Investment and GEM Co, you can compare the effects of market volatilities on Zoje Resources and GEM 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 Zoje Resources with a short position of GEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoje Resources and GEM.

Diversification Opportunities for Zoje Resources and GEM

0.08

Correlation Coefficient

Zoje Resources  GEM

Significant diversification

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

Pair Corralation between Zoje Resources and GEM

Assuming the 90 days trading horizon Zoje Resources Investment is expected to under-perform the GEM. In addition to that, Zoje Resources is 2.63 times more volatile than GEM Co. It trades about -0.23 of its total potential returns per unit of risk. GEM Co is currently generating about -0.28 per unit of volatility. If you would invest  690.00  in GEM Co on October 11, 2024 and sell it today you would lose (54.00) from holding GEM Co or give up 7.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Zoje Resources Investment  vs.  GEM Co

Zoje Resources Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoje Resources Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoje Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

GEM Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEM Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GEM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zoje Resources and GEM

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

The idea behind Zoje Resources Investment and GEM Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.