Correlation Between CompoSecure and Gulf Island

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

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

Diversification Opportunities for CompoSecure and Gulf Island

0.58

Correlation Coefficient

CompoSecure  Gulf Island

Very weak diversification

The 3 months correlation between CompoSecure and Gulf is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and Gulf Island Fabrication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Island Fabrication and CompoSecure 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 CompoSecure are associated (or correlated) with Gulf Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Island Fabrication has no effect on the direction of CompoSecure i.e., CompoSecure and Gulf Island go up and down completely randomly.

Pair Corralation between CompoSecure and Gulf Island

Given the investment horizon of 90 days CompoSecure is expected to under-perform the Gulf Island. In addition to that, CompoSecure is 1.53 times more volatile than Gulf Island Fabrication. It trades about -0.07 of its total potential returns per unit of risk. Gulf Island Fabrication is currently generating about -0.02 per unit of volatility. If you would invest  676.00  in Gulf Island Fabrication on December 30, 2024 and sell it today you would lose (23.00) from holding Gulf Island Fabrication or give up 3.4% of portfolio value over 90 days.

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

CompoSecure  vs.  Gulf Island Fabrication

CompoSecure

Risk-Adjusted Performance

Very Weak

Over the last 90 days CompoSecure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Gulf Island Fabrication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gulf Island Fabrication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Gulf Island is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CompoSecure and Gulf Island

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

The idea behind CompoSecure and Gulf Island Fabrication 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.