Correlation Between ESAB Corp and Gulf Island

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

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

Diversification Opportunities for ESAB Corp and Gulf Island

0.04

Correlation Coefficient

ESAB Corp  Gulf Island

Significant diversification

The 3 months correlation between ESAB and Gulf is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding ESAB Corp 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 ESAB Corp 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 ESAB Corp 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 ESAB Corp i.e., ESAB Corp and Gulf Island go up and down completely randomly.

Pair Corralation between ESAB Corp and Gulf Island

Given the investment horizon of 90 days ESAB Corp is expected to generate 0.94 times more return on investment than Gulf Island. However, ESAB Corp is 1.06 times less risky than Gulf Island. It trades about 0.0 of its potential returns per unit of risk. Gulf Island Fabrication is currently generating about -0.05 per unit of risk. If you would invest  12,133  in ESAB Corp on December 27, 2024 and sell it today you would lose (175.00) from holding ESAB Corp or give up 1.44% of portfolio value over 90 days.

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

ESAB Corp  vs.  Gulf Island Fabrication

ESAB Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESAB Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ESAB Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with ESAB Corp and Gulf Island

The main advantage of trading using opposite ESAB Corp and Gulf Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESAB Corp 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 ESAB Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.