Correlation Between S A P and Gemfields

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

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

Diversification Opportunities for S A P and Gemfields

0.0

Correlation Coefficient

S A P  Gemfields

Pay attention - limited upside

The 3 months correlation between SAP and Gemfields is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sappi and Gemfields Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemfields Group and S A P 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 Sappi are associated (or correlated) with Gemfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemfields Group has no effect on the direction of S A P i.e., S A P and Gemfields go up and down completely randomly.

Pair Corralation between S A P and Gemfields

If you would invest (100.00) in Sappi on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Sappi or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Sappi  vs.  Gemfields Group

Sappi

Risk-Adjusted Performance

Very Weak

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

Gemfields Group

Risk-Adjusted Performance

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 rather sound technical and fundamental indicators, Gemfields is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with S A P and Gemfields

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

The idea behind Sappi and Gemfields 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.