Correlation Between Gemfields and Nedbank

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

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

Diversification Opportunities for Gemfields and Nedbank

0.6

Correlation Coefficient

Gemfields  Nedbank

Poor diversification

The 3 months correlation between Gemfields and Nedbank is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Gemfields Group and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group and Gemfields 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 are associated (or correlated) with Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of Gemfields i.e., Gemfields and Nedbank go up and down completely randomly.

Pair Corralation between Gemfields and Nedbank

Assuming the 90 days trading horizon Gemfields Group is expected to under-perform the Nedbank. In addition to that, Gemfields is 4.09 times more volatile than Nedbank Group. It trades about -0.13 of its total potential returns per unit of risk. Nedbank Group is currently generating about -0.05 per unit of volatility. If you would invest  2,963,500  in Nedbank Group on October 11, 2024 and sell it today you would lose (130,600) from holding Nedbank Group or give up 4.41% of portfolio value over 90 days.

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

Gemfields Group  vs.  Nedbank Group

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.

Nedbank Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nedbank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Nedbank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gemfields and Nedbank

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

The idea behind Gemfields Group and Nedbank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.