Correlation Between AECI and Gemfields

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

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

Diversification Opportunities for AECI and Gemfields

0.94

Correlation Coefficient

AECI  Gemfields

Almost no diversification

The 3 months correlation between AECI and Gemfields is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding AECI and Gemfields Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemfields Group and AECI 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 AECI are associated (or correlated) with Gemfields. 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 AECI i.e., AECI and Gemfields go up and down completely randomly.

Pair Corralation between AECI and Gemfields

Assuming the 90 days trading horizon AECI is expected to generate 0.18 times more return on investment than Gemfields. However, AECI is 5.69 times less risky than Gemfields. It trades about -0.28 of its potential returns per unit of risk. Gemfields Group is currently generating about -0.15 per unit of risk. If you would invest  1,007,200  in AECI on October 12, 2024 and sell it today you would lose (154,200) from holding AECI or give up 15.31% of portfolio value over 90 days.

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

AECI  vs.  Gemfields Group

AECI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AECI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Gemfields Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gemfields Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AECI and Gemfields

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

The idea behind AECI and Gemfields Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.