Correlation Between SCOR PK and Gem Diamonds
Can any of the company-specific risk be diversified away by investing in both SCOR PK and Gem Diamonds 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 SCOR PK and Gem Diamonds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCOR PK and Gem Diamonds Limited, you can compare the effects of market volatilities on SCOR PK and Gem Diamonds 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 SCOR PK with a short position of Gem Diamonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCOR PK and Gem Diamonds.
Diversification Opportunities for SCOR PK and Gem Diamonds
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SCOR and Gem is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding SCOR PK and Gem Diamonds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gem Diamonds Limited and SCOR PK 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 SCOR PK are associated (or correlated) with Gem Diamonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gem Diamonds Limited has no effect on the direction of SCOR PK i.e., SCOR PK and Gem Diamonds go up and down completely randomly.
Pair Corralation between SCOR PK and Gem Diamonds
Assuming the 90 days horizon SCOR PK is expected to generate 0.61 times more return on investment than Gem Diamonds. However, SCOR PK is 1.64 times less risky than Gem Diamonds. It trades about 0.25 of its potential returns per unit of risk. Gem Diamonds Limited is currently generating about -0.22 per unit of risk. If you would invest 215.00 in SCOR PK on September 2, 2024 and sell it today you would earn a total of 33.00 from holding SCOR PK or generate 15.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SCOR PK vs. Gem Diamonds Limited
Performance |
| Timeline |
| SCOR PK |
| Gem Diamonds Limited |
SCOR PK and Gem Diamonds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCOR PK and Gem Diamonds
The main advantage of trading using opposite SCOR PK and Gem Diamonds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOR PK position performs unexpectedly, Gem Diamonds 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 Gem Diamonds will offset losses from the drop in Gem Diamonds' long position.The idea behind SCOR PK and Gem Diamonds 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.| Gem Diamonds vs. Defiance Silver Corp | Gem Diamonds vs. Southern Silver Exploration | Gem Diamonds vs. Silver Grail Resources | Gem Diamonds vs. Alien Metals |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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