Correlation Between Gulf Energy and KCE Electronics

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

By analyzing existing cross correlation between Gulf Energy Development and KCE Electronics Public, you can compare the effects of market volatilities on Gulf Energy and KCE Electronics 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 KCE Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Energy and KCE Electronics.

Diversification Opportunities for Gulf Energy and KCE Electronics

-0.37

Correlation Coefficient

Gulf Energy  KCE Electronics

Very good diversification

The 3 months correlation between Gulf and KCE is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and KCE Electronics Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCE Electronics Public 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 are associated (or correlated) with KCE Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCE Electronics Public has no effect on the direction of Gulf Energy i.e., Gulf Energy and KCE Electronics go up and down completely randomly.

Pair Corralation between Gulf Energy and KCE Electronics

Assuming the 90 days trading horizon Gulf Energy Development is expected to generate 0.82 times more return on investment than KCE Electronics. However, Gulf Energy Development is 1.22 times less risky than KCE Electronics. It trades about 0.1 of its potential returns per unit of risk. KCE Electronics Public is currently generating about -0.28 per unit of risk. If you would invest  5,575  in Gulf Energy Development on September 14, 2024 and sell it today you would earn a total of  675.00  from holding Gulf Energy Development or generate 12.11% return on investment over 90 days.

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

Gulf Energy Development  vs.  KCE Electronics Public

Gulf Energy Development

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Energy Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Gulf Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

KCE Electronics Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCE Electronics Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Gulf Energy and KCE Electronics

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

The idea behind Gulf Energy Development and KCE Electronics Public 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.