Correlation Between Gemfields and Indexco Limited

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

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

Diversification Opportunities for Gemfields and Indexco Limited

0.3

Correlation Coefficient

Gemfields  Indexco Limited

Weak diversification

The 3 months correlation between Gemfields and Indexco is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Gemfields Group and Indexco Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indexco Limited 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 Indexco Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indexco Limited has no effect on the direction of Gemfields i.e., Gemfields and Indexco Limited go up and down completely randomly.

Pair Corralation between Gemfields and Indexco Limited

Assuming the 90 days trading horizon Gemfields Group is expected to under-perform the Indexco Limited. In addition to that, Gemfields is 9.94 times more volatile than Indexco Limited . It trades about -0.15 of its total potential returns per unit of risk. Indexco Limited is currently generating about -0.04 per unit of volatility. If you would invest  426,400  in Indexco Limited on September 24, 2024 and sell it today you would lose (2,600) from holding Indexco Limited or give up 0.61% of portfolio value over 90 days.

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

Gemfields Group  vs.  Indexco Limited

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Indexco Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indexco Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Indexco Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gemfields and Indexco Limited

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

The idea behind Gemfields Group and Indexco 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.