Correlation Between Gemfields Group and Southern Silver

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

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

Diversification Opportunities for Gemfields Group and Southern Silver

0.5

Correlation Coefficient

Gemfields Group  Southern Silver

Very weak diversification

The 3 months correlation between Gemfields and Southern is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Gemfields Group Limited and Southern Silver Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Silver Expl and Gemfields Group 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 Limited are associated (or correlated) with Southern Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Silver Expl has no effect on the direction of Gemfields Group i.e., Gemfields Group and Southern Silver go up and down completely randomly.

Pair Corralation between Gemfields Group and Southern Silver

Assuming the 90 days horizon Gemfields Group Limited is expected to under-perform the Southern Silver. In addition to that, Gemfields Group is 1.45 times more volatile than Southern Silver Exploration. It trades about -0.16 of its total potential returns per unit of risk. Southern Silver Exploration is currently generating about -0.1 per unit of volatility. If you would invest  14.00  in Southern Silver Exploration on October 27, 2024 and sell it today you would lose (2.00) from holding Southern Silver Exploration or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Gemfields Group Limited  vs.  Southern Silver Exploration

Gemfields Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gemfields Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Southern Silver Expl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Silver Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gemfields Group and Southern Silver

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

The idea behind Gemfields Group Limited and Southern Silver Exploration 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.