Correlation Between Curtiss Wright and Gulf Island

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

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

Diversification Opportunities for Curtiss Wright and Gulf Island

0.67

Correlation Coefficient

Curtiss Wright  Gulf Island

Poor diversification

The 3 months correlation between Curtiss and Gulf is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Curtiss Wright 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 Curtiss Wright 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 Curtiss Wright 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 Curtiss Wright i.e., Curtiss Wright and Gulf Island go up and down completely randomly.

Pair Corralation between Curtiss Wright and Gulf Island

Allowing for the 90-day total investment horizon Curtiss Wright is expected to generate 0.52 times more return on investment than Gulf Island. However, Curtiss Wright is 1.93 times less risky than Gulf Island. It trades about 0.2 of its potential returns per unit of risk. Gulf Island Fabrication is currently generating about 0.1 per unit of risk. If you would invest  30,260  in Curtiss Wright on August 31, 2024 and sell it today you would earn a total of  6,877  from holding Curtiss Wright or generate 22.73% return on investment over 90 days.

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

Curtiss Wright  vs.  Gulf Island Fabrication

Curtiss Wright

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Curtiss Wright are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Curtiss Wright showed solid returns over the last few months and may actually be approaching a breakup point.

Gulf Island Fabrication

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 7 (%) 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 Curtiss Wright and Gulf Island

The main advantage of trading using opposite Curtiss Wright and Gulf Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Curtiss Wright 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 Curtiss Wright 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.