Correlation Between AfriTin Mining and Gear4music (Holdings)

Can any of the company-specific risk be diversified away by investing in both AfriTin Mining and Gear4music (Holdings) 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 AfriTin Mining and Gear4music (Holdings) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AfriTin Mining and Gear4music Plc, you can compare the effects of market volatilities on AfriTin Mining and Gear4music (Holdings) 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 AfriTin Mining with a short position of Gear4music (Holdings). Check out your portfolio center. Please also check ongoing floating volatility patterns of AfriTin Mining and Gear4music (Holdings).

Diversification Opportunities for AfriTin Mining and Gear4music (Holdings)

0.57

Correlation Coefficient

AfriTin Mining  Gear4music (Holdings)

Very weak diversification

The 3 months correlation between AfriTin and Gear4music is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding AfriTin Mining and Gear4music Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gear4music (Holdings) and AfriTin Mining 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 AfriTin Mining are associated (or correlated) with Gear4music (Holdings). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gear4music (Holdings) has no effect on the direction of AfriTin Mining i.e., AfriTin Mining and Gear4music (Holdings) go up and down completely randomly.

Pair Corralation between AfriTin Mining and Gear4music (Holdings)

Assuming the 90 days trading horizon AfriTin Mining is expected to under-perform the Gear4music (Holdings). In addition to that, AfriTin Mining is 1.1 times more volatile than Gear4music Plc. It trades about -0.03 of its total potential returns per unit of risk. Gear4music Plc is currently generating about 0.04 per unit of volatility. If you would invest  9,150  in Gear4music Plc on December 4, 2024 and sell it today you would earn a total of  5,350  from holding Gear4music Plc or generate 58.47% return on investment over 90 days.

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

AfriTin Mining  vs.  Gear4music Plc

AfriTin Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days AfriTin Mining 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Gear4music (Holdings)

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gear4music Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AfriTin Mining and Gear4music (Holdings)

The main advantage of trading using opposite AfriTin Mining and Gear4music (Holdings) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AfriTin Mining position performs unexpectedly, Gear4music (Holdings) 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 Gear4music (Holdings) will offset losses from the drop in Gear4music (Holdings)'s long position.

The idea behind AfriTin Mining and Gear4music Plc 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.