Correlation Between NEW PACIFIC and Gemfields Group

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

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

Diversification Opportunities for NEW PACIFIC and Gemfields Group

0.35

Correlation Coefficient

NEW PACIFIC  Gemfields Group

Weak diversification

The 3 months correlation between NEW and Gemfields is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding NEW PACIFIC METALS and Gemfields Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemfields Group and NEW PACIFIC 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 NEW PACIFIC METALS 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 NEW PACIFIC i.e., NEW PACIFIC and Gemfields Group go up and down completely randomly.

Pair Corralation between NEW PACIFIC and Gemfields Group

Assuming the 90 days trading horizon NEW PACIFIC METALS is expected to under-perform the Gemfields Group. But the stock apears to be less risky and, when comparing its historical volatility, NEW PACIFIC METALS is 1.15 times less risky than Gemfields Group. The stock trades about -0.02 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  18.00  in Gemfields Group Limited on September 30, 2024 and sell it today you would lose (10.20) from holding Gemfields Group Limited or give up 56.67% of portfolio value over 90 days.

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

NEW PACIFIC METALS  vs.  Gemfields Group Limited

NEW PACIFIC METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEW PACIFIC METALS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company 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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NEW PACIFIC and Gemfields Group

The main advantage of trading using opposite NEW PACIFIC and Gemfields Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEW PACIFIC 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 NEW PACIFIC METALS 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 CEOs Directory module to screen CEOs from public companies around the world.