Correlation Between GULF ENERGY and BANPU POWER

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

By analyzing existing cross correlation between GULF ENERGY DEVELOPMENT NVDR and BANPU POWER, you can compare the effects of market volatilities on GULF ENERGY and BANPU POWER 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 ENERGY with a short position of BANPU POWER. Check out your portfolio center. Please also check ongoing floating volatility patterns of GULF ENERGY and BANPU POWER.

Diversification Opportunities for GULF ENERGY and BANPU POWER

-0.9

Correlation Coefficient

GULF ENERGY  BANPU POWER

Pay attention - limited upside

The 3 months correlation between GULF and BANPU is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding GULF ENERGY DEVELOPMENT NVDR and BANPU POWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANPU POWER and GULF ENERGY 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 ENERGY DEVELOPMENT NVDR are associated (or correlated) with BANPU POWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANPU POWER has no effect on the direction of GULF ENERGY i.e., GULF ENERGY and BANPU POWER go up and down completely randomly.

Pair Corralation between GULF ENERGY and BANPU POWER

Assuming the 90 days trading horizon GULF ENERGY DEVELOPMENT NVDR is expected to generate 1.42 times more return on investment than BANPU POWER. However, GULF ENERGY is 1.42 times more volatile than BANPU POWER. It trades about 0.11 of its potential returns per unit of risk. BANPU POWER is currently generating about -0.15 per unit of risk. If you would invest  4,750  in GULF ENERGY DEVELOPMENT NVDR on September 24, 2024 and sell it today you would earn a total of  1,175  from holding GULF ENERGY DEVELOPMENT NVDR or generate 24.74% return on investment over 90 days.

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

GULF ENERGY DEVELOPMENT NVDR  vs.  BANPU POWER

GULF ENERGY DEVELOPMENT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GULF ENERGY DEVELOPMENT NVDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting essential indicators, GULF ENERGY sustained solid returns over the last few months and may actually be approaching a breakup point.

BANPU POWER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANPU POWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GULF ENERGY and BANPU POWER

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

The idea behind GULF ENERGY DEVELOPMENT NVDR and BANPU POWER 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.