Correlation Between Mesabi Trust and Gulf Resources

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

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

Diversification Opportunities for Mesabi Trust and Gulf Resources

-0.83

Correlation Coefficient

Mesabi Trust  Gulf Resources

Pay attention - limited upside

The 3 months correlation between Mesabi and Gulf is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mesabi Trust and Gulf Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Resources and Mesabi Trust 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 Mesabi Trust are associated (or correlated) with Gulf Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Resources has no effect on the direction of Mesabi Trust i.e., Mesabi Trust and Gulf Resources go up and down completely randomly.

Pair Corralation between Mesabi Trust and Gulf Resources

Considering the 90-day investment horizon Mesabi Trust is expected to generate 0.65 times more return on investment than Gulf Resources. However, Mesabi Trust is 1.53 times less risky than Gulf Resources. It trades about 0.24 of its potential returns per unit of risk. Gulf Resources is currently generating about -0.14 per unit of risk. If you would invest  1,695  in Mesabi Trust on September 1, 2024 and sell it today you would earn a total of  1,081  from holding Mesabi Trust or generate 63.78% return on investment over 90 days.

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

Mesabi Trust  vs.  Gulf Resources

Mesabi Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mesabi Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Mesabi Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Gulf Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gulf Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Mesabi Trust and Gulf Resources

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

The idea behind Mesabi Trust and Gulf Resources 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.