Correlation Between BTS Group and Gulf Energy

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

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

Diversification Opportunities for BTS Group and Gulf Energy

0.23

Correlation Coefficient

BTS Group  Gulf Energy

Modest diversification

The 3 months correlation between BTS and Gulf is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding BTS Group Holdings and Gulf Energy Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Energy Development and BTS 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 BTS Group Holdings are associated (or correlated) with Gulf Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Energy Development has no effect on the direction of BTS Group i.e., BTS Group and Gulf Energy go up and down completely randomly.

Pair Corralation between BTS Group and Gulf Energy

Assuming the 90 days trading horizon BTS Group Holdings is expected to generate 0.81 times more return on investment than Gulf Energy. However, BTS Group Holdings is 1.24 times less risky than Gulf Energy. It trades about 0.21 of its potential returns per unit of risk. Gulf Energy Development is currently generating about 0.08 per unit of risk. If you would invest  476.00  in BTS Group Holdings on September 16, 2024 and sell it today you would earn a total of  114.00  from holding BTS Group Holdings or generate 23.95% return on investment over 90 days.

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

BTS Group Holdings  vs.  Gulf Energy Development

BTS Group Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BTS Group Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, BTS Group disclosed solid returns over the last few months and may actually be approaching a breakup point.

Gulf Energy Development

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Energy Development are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Gulf Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BTS Group and Gulf Energy

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

The idea behind BTS Group Holdings and Gulf Energy Development 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.