Correlation Between Gulf Island and 90331HPL1

Can any of the company-specific risk be diversified away by investing in both Gulf Island and 90331HPL1 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 Gulf Island and 90331HPL1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gulf Island Fabrication and US BANK NATIONAL, you can compare the effects of market volatilities on Gulf Island and 90331HPL1 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 Gulf Island with a short position of 90331HPL1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Island and 90331HPL1.

Diversification Opportunities for Gulf Island and 90331HPL1

-0.24

Correlation Coefficient

Gulf Island  90331HPL1

Very good diversification

The 3 months correlation between Gulf and 90331HPL1 is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and US BANK NATIONAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US BANK NATIONAL and Gulf Island 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 Gulf Island Fabrication are associated (or correlated) with 90331HPL1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US BANK NATIONAL has no effect on the direction of Gulf Island i.e., Gulf Island and 90331HPL1 go up and down completely randomly.

Pair Corralation between Gulf Island and 90331HPL1

Given the investment horizon of 90 days Gulf Island is expected to generate 75.22 times less return on investment than 90331HPL1. But when comparing it to its historical volatility, Gulf Island Fabrication is 32.8 times less risky than 90331HPL1. It trades about 0.04 of its potential returns per unit of risk. US BANK NATIONAL is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,524  in US BANK NATIONAL on September 28, 2024 and sell it today you would earn a total of  23.00  from holding US BANK NATIONAL or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.03%
Values	Daily Returns

Gulf Island Fabrication  vs.  US BANK NATIONAL

Gulf Island Fabrication

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 10 (%) 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.

US BANK NATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US BANK NATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90331HPL1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gulf Island and 90331HPL1

The main advantage of trading using opposite Gulf Island and 90331HPL1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gulf Island position performs unexpectedly, 90331HPL1 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 90331HPL1 will offset losses from the drop in 90331HPL1's long position.

The idea behind Gulf Island Fabrication and US BANK NATIONAL 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.