Correlation Between Gulf Island and Preferred Commerce

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

Diversification Opportunities for Gulf Island and Preferred Commerce

0.56

Correlation Coefficient

Gulf Island  Preferred Commerce

Very weak diversification

The 3 months correlation between Gulf and Preferred is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Preferred Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Commerce 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 Preferred Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Commerce has no effect on the direction of Gulf Island i.e., Gulf Island and Preferred Commerce go up and down completely randomly.

Pair Corralation between Gulf Island and Preferred Commerce

Given the investment horizon of 90 days Gulf Island Fabrication is expected to under-perform the Preferred Commerce. But the stock apears to be less risky and, when comparing its historical volatility, Gulf Island Fabrication is 6.18 times less risky than Preferred Commerce. The stock trades about -0.04 of its potential returns per unit of risk. The Preferred Commerce is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  289.00  in Preferred Commerce on October 15, 2024 and sell it today you would earn a total of  85.00  from holding Preferred Commerce or generate 29.41% return on investment over 90 days.

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

Gulf Island Fabrication  vs.  Preferred Commerce

Gulf Island Fabrication

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 12 (%) 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.

Preferred Commerce

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Commerce are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Preferred Commerce showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Island and Preferred Commerce

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

The idea behind Gulf Island Fabrication and Preferred Commerce 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.