Correlation Between Gulf Energy and Rojana Industrial

Can any of the company-specific risk be diversified away by investing in both Gulf Energy and Rojana Industrial 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 Rojana Industrial 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 Rojana Industrial Park, you can compare the effects of market volatilities on Gulf Energy and Rojana Industrial 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 Rojana Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Energy and Rojana Industrial.

Diversification Opportunities for Gulf Energy and Rojana Industrial

0.79

Correlation Coefficient

Gulf Energy  Rojana Industrial

Poor diversification

The 3 months correlation between Gulf and Rojana is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and Rojana Industrial Park in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rojana Industrial Park 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 Rojana Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rojana Industrial Park has no effect on the direction of Gulf Energy i.e., Gulf Energy and Rojana Industrial go up and down completely randomly.

Pair Corralation between Gulf Energy and Rojana Industrial

Assuming the 90 days trading horizon Gulf Energy Development is expected to generate 0.89 times more return on investment than Rojana Industrial. However, Gulf Energy Development is 1.13 times less risky than Rojana Industrial. It trades about 0.2 of its potential returns per unit of risk. Rojana Industrial Park is currently generating about 0.07 per unit of risk. If you would invest  5,100  in Gulf Energy Development on September 4, 2024 and sell it today you would earn a total of  1,450  from holding Gulf Energy Development or generate 28.43% return on investment over 90 days.

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

Gulf Energy Development  vs.  Rojana Industrial Park

Gulf Energy Development

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Energy Development are ranked lower than 15 (%) 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.

Rojana Industrial Park

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rojana Industrial Park are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Rojana Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gulf Energy and Rojana Industrial

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

The idea behind Gulf Energy Development and Rojana Industrial Park 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.