Correlation Between United States and Gulf Resources

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

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

Diversification Opportunities for United States and Gulf Resources

-0.68

Correlation Coefficient

United States  Gulf Resources

Excellent diversification

The 3 months correlation between United and Gulf is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Gulf Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Resources and United States 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 United States Steel 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 United States i.e., United States and Gulf Resources go up and down completely randomly.

Pair Corralation between United States and Gulf Resources

Taking into account the 90-day investment horizon United States Steel is expected to generate 0.66 times more return on investment than Gulf Resources. However, United States Steel is 1.52 times less risky than Gulf Resources. It trades about 0.08 of its potential returns per unit of risk. Gulf Resources is currently generating about -0.14 per unit of risk. If you would invest  3,556  in United States Steel on September 1, 2024 and sell it today you would earn a total of  521.00  from holding United States Steel or generate 14.65% return on investment over 90 days.

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

United States Steel  vs.  Gulf Resources

United States Steel

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, United States showed 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 United States and Gulf Resources

The main advantage of trading using opposite United States and Gulf Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.