Correlation Between Gemfields Group and Fresnillo Plc

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Can any of the company-specific risk be diversified away by investing in both Gemfields Group and Fresnillo Plc 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 Fresnillo Plc 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 Fresnillo plc, you can compare the effects of market volatilities on Gemfields Group and Fresnillo Plc 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 Fresnillo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gemfields Group and Fresnillo Plc.

Diversification Opportunities for Gemfields Group and Fresnillo Plc

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Gemfields and Fresnillo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Gemfields Group Limited and Fresnillo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresnillo plc 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 Fresnillo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresnillo plc has no effect on the direction of Gemfields Group i.e., Gemfields Group and Fresnillo Plc go up and down completely randomly.

Pair Corralation between Gemfields Group and Fresnillo Plc

Assuming the 90 days horizon Gemfields Group Limited is expected to under-perform the Fresnillo Plc. In addition to that, Gemfields Group is 1.7 times more volatile than Fresnillo plc. It trades about -0.02 of its total potential returns per unit of risk. Fresnillo plc is currently generating about -0.01 per unit of volatility. If you would invest  987.00  in Fresnillo plc on September 24, 2024 and sell it today you would lose (234.00) from holding Fresnillo plc or give up 23.71% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Gemfields Group Limited  vs.  Fresnillo plc

 Performance 
       Timeline  
Gemfields Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Fresnillo plc 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Fresnillo plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fresnillo Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gemfields Group and Fresnillo Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gemfields Group and Fresnillo Plc

The main advantage of trading using opposite Gemfields Group and Fresnillo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gemfields Group position performs unexpectedly, Fresnillo Plc 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 Fresnillo Plc will offset losses from the drop in Fresnillo Plc's long position.
The idea behind Gemfields Group Limited and Fresnillo plc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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