Correlation Between Arconic and Gulf Island

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

By analyzing existing cross correlation between Arconic and Gulf Island Fabrication, you can compare the effects of market volatilities on Arconic and Gulf Island 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 Arconic with a short position of Gulf Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arconic and Gulf Island.

Diversification Opportunities for Arconic and Gulf Island

0.5

Correlation Coefficient

Arconic  Gulf Island

Very weak diversification

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

Pair Corralation between Arconic and Gulf Island

If you would invest  531.00  in Gulf Island Fabrication on September 12, 2024 and sell it today you would earn a total of  165.00  from holding Gulf Island Fabrication or generate 31.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Arconic  vs.  Gulf Island Fabrication

Arconic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gulf Island Fabrication

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gulf Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arconic and Gulf Island

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

The idea behind Arconic and Gulf Island Fabrication 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.