Correlation Between Scottie Resources and Gemfields Group

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

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

Diversification Opportunities for Scottie Resources and Gemfields Group

0.09

Correlation Coefficient

Scottie Resources  Gemfields Group

Significant diversification

The 3 months correlation between Scottie and Gemfields is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Scottie Resources Corp and Gemfields Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemfields Group and Scottie Resources 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 Scottie Resources Corp are associated (or correlated) with Gemfields Group. 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 Scottie Resources i.e., Scottie Resources and Gemfields Group go up and down completely randomly.

Pair Corralation between Scottie Resources and Gemfields Group

Assuming the 90 days horizon Scottie Resources Corp is expected to generate 11.55 times more return on investment than Gemfields Group. However, Scottie Resources is 11.55 times more volatile than Gemfields Group Limited. It trades about 0.15 of its potential returns per unit of risk. Gemfields Group Limited is currently generating about 0.01 per unit of risk. If you would invest  14.00  in Scottie Resources Corp on August 31, 2024 and sell it today you would lose (2.00) from holding Scottie Resources Corp or give up 14.29% of portfolio value over 90 days.

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

Scottie Resources Corp  vs.  Gemfields Group Limited

Scottie Resources Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scottie Resources Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Scottie Resources reported solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable technical indicators, Gemfields Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Scottie Resources and Gemfields Group

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

The idea behind Scottie Resources Corp and Gemfields Group 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.