Correlation Between Gulf Island and Blue Line

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

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

Diversification Opportunities for Gulf Island and Blue Line

-0.75

Correlation Coefficient

Gulf Island  Blue Line

Pay attention - limited upside

The 3 months correlation between Gulf and Blue is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Blue Line Protection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Line Protection and Gulf Island 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 Gulf Island Fabrication are associated (or correlated) with Blue Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Line Protection has no effect on the direction of Gulf Island i.e., Gulf Island and Blue Line go up and down completely randomly.

Pair Corralation between Gulf Island and Blue Line

Given the investment horizon of 90 days Gulf Island is expected to generate 1241.0 times less return on investment than Blue Line. But when comparing it to its historical volatility, Gulf Island Fabrication is 8.99 times less risky than Blue Line. It trades about 0.0 of its potential returns per unit of risk. Blue Line Protection is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Blue Line Protection on September 24, 2024 and sell it today you would earn a total of  1.51  from holding Blue Line Protection or generate 37.75% return on investment over 90 days.

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

Gulf Island Fabrication  vs.  Blue Line Protection

Gulf Island Fabrication

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gulf Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Blue Line Protection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Line Protection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gulf Island and Blue Line

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

The idea behind Gulf Island Fabrication and Blue Line Protection 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.