Correlation Between Gemz Corp and Plandai Biotech

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

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

Diversification Opportunities for Gemz Corp and Plandai Biotech

0.45

Correlation Coefficient

Gemz Corp  Plandai Biotech

Very weak diversification

The 3 months correlation between Gemz and Plandai is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gemz Corp and Plandai Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plandai Biotech and Gemz Corp 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 Gemz Corp are associated (or correlated) with Plandai Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plandai Biotech has no effect on the direction of Gemz Corp i.e., Gemz Corp and Plandai Biotech go up and down completely randomly.

Pair Corralation between Gemz Corp and Plandai Biotech

Given the investment horizon of 90 days Gemz Corp is expected to generate 7.32 times less return on investment than Plandai Biotech. But when comparing it to its historical volatility, Gemz Corp is 4.33 times less risky than Plandai Biotech. It trades about 0.09 of its potential returns per unit of risk. Plandai Biotech is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Plandai Biotech on October 18, 2024 and sell it today you would lose (0.01) from holding Plandai Biotech or give up 50.0% of portfolio value over 90 days.

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

Gemz Corp  vs.  Plandai Biotech

Gemz Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gemz Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gemz Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Plandai Biotech

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plandai Biotech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Plandai Biotech disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gemz Corp and Plandai Biotech

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

The idea behind Gemz Corp and Plandai Biotech 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.