Correlation Between Gulf Island and Coca-Cola Bottlers

Can any of the company-specific risk be diversified away by investing in both Gulf Island and Coca-Cola Bottlers 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 Coca-Cola Bottlers 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 Coca Cola Bottlers Japan, you can compare the effects of market volatilities on Gulf Island and Coca-Cola Bottlers 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 Coca-Cola Bottlers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Island and Coca-Cola Bottlers.

Diversification Opportunities for Gulf Island and Coca-Cola Bottlers

0.89

Correlation Coefficient

Gulf Island  Coca-Cola Bottlers

Very poor diversification

The 3 months correlation between Gulf and Coca-Cola is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Coca Cola Bottlers Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Bottlers 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 Coca-Cola Bottlers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola Bottlers has no effect on the direction of Gulf Island i.e., Gulf Island and Coca-Cola Bottlers go up and down completely randomly.

Pair Corralation between Gulf Island and Coca-Cola Bottlers

Given the investment horizon of 90 days Gulf Island Fabrication is expected to generate 0.71 times more return on investment than Coca-Cola Bottlers. However, Gulf Island Fabrication is 1.42 times less risky than Coca-Cola Bottlers. It trades about 0.13 of its potential returns per unit of risk. Coca Cola Bottlers Japan is currently generating about 0.06 per unit of risk. If you would invest  556.00  in Gulf Island Fabrication on October 1, 2024 and sell it today you would earn a total of  149.00  from holding Gulf Island Fabrication or generate 26.8% return on investment over 90 days.

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

Gulf Island Fabrication  vs.  Coca Cola Bottlers Japan

Gulf Island Fabrication

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 10 (%) 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.

Coca Cola Bottlers

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Bottlers Japan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Coca-Cola Bottlers showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Island and Coca-Cola Bottlers

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

The idea behind Gulf Island Fabrication and Coca Cola Bottlers Japan 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.