Correlation Between Foothills Exploration and GulfSlope Energy

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

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

Diversification Opportunities for Foothills Exploration and GulfSlope Energy

0.0

Correlation Coefficient

Foothills Exploration  GulfSlope Energy

Pay attention - limited upside

The 3 months correlation between Foothills and GulfSlope is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Foothills Exploration and GulfSlope Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GulfSlope Energy and Foothills Exploration 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 Foothills Exploration are associated (or correlated) with GulfSlope Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GulfSlope Energy has no effect on the direction of Foothills Exploration i.e., Foothills Exploration and GulfSlope Energy go up and down completely randomly.

Pair Corralation between Foothills Exploration and GulfSlope Energy

Given the investment horizon of 90 days Foothills Exploration is expected to under-perform the GulfSlope Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Foothills Exploration is 10.11 times less risky than GulfSlope Energy. The pink sheet trades about -0.08 of its potential returns per unit of risk. The GulfSlope Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.01  in GulfSlope Energy on September 13, 2024 and sell it today you would lose (0.01) from holding GulfSlope Energy or give up 100.0% of portfolio value over 90 days.

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

Foothills Exploration  vs.  GulfSlope Energy

Foothills Exploration

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Foothills Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Foothills Exploration is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

GulfSlope Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GulfSlope Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Foothills Exploration and GulfSlope Energy

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

The idea behind Foothills Exploration and GulfSlope Energy 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 Transaction History module to view history of all your transactions and understand their impact on performance.