Correlation Between Carabao Group and Gulf Energy

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

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

Diversification Opportunities for Carabao Group and Gulf Energy

0.39

Correlation Coefficient

Carabao Group  Gulf Energy

Weak diversification

The 3 months correlation between Carabao and Gulf is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Carabao Group Public and Gulf Energy Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Energy Development and Carabao Group 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 Carabao Group Public are associated (or correlated) with Gulf Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Energy Development has no effect on the direction of Carabao Group i.e., Carabao Group and Gulf Energy go up and down completely randomly.

Pair Corralation between Carabao Group and Gulf Energy

Assuming the 90 days trading horizon Carabao Group Public is expected to generate 0.74 times more return on investment than Gulf Energy. However, Carabao Group Public is 1.36 times less risky than Gulf Energy. It trades about 0.04 of its potential returns per unit of risk. Gulf Energy Development is currently generating about -0.1 per unit of risk. If you would invest  7,900  in Carabao Group Public on September 27, 2024 and sell it today you would earn a total of  75.00  from holding Carabao Group Public or generate 0.95% return on investment over 90 days.

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

Carabao Group Public  vs.  Gulf Energy Development

Carabao Group Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carabao Group Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Carabao Group is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Gulf Energy Development

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Energy Development are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Gulf Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Carabao Group and Gulf Energy

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

The idea behind Carabao Group Public and Gulf Energy Development 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 Global Correlations module to find global opportunities by holding instruments from different markets.