Correlation Between Gemfields Group and NorAm Drilling

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

Diversification Opportunities for Gemfields Group and NorAm Drilling

0.78

Correlation Coefficient

Gemfields Group  NorAm Drilling

Poor diversification

The 3 months correlation between Gemfields and NorAm is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Gemfields Group Limited and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Gemfields Group i.e., Gemfields Group and NorAm Drilling go up and down completely randomly.

Pair Corralation between Gemfields Group and NorAm Drilling

Assuming the 90 days horizon Gemfields Group Limited is expected to under-perform the NorAm Drilling. In addition to that, Gemfields Group is 1.38 times more volatile than NorAm Drilling AS. It trades about -0.03 of its total potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.01 per unit of volatility. If you would invest  297.00  in NorAm Drilling AS on October 6, 2024 and sell it today you would lose (11.00) from holding NorAm Drilling AS or give up 3.7% of portfolio value over 90 days.

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

Gemfields Group Limited  vs.  NorAm Drilling AS

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NorAm Drilling AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NorAm Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with Gemfields Group and NorAm Drilling

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

The idea behind Gemfields Group Limited and NorAm Drilling AS 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.