Correlation Between Gulf Island and CompoSecure

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

Diversification Opportunities for Gulf Island and CompoSecure

0.58

Correlation Coefficient

Gulf Island  CompoSecure

Very weak diversification

The 3 months correlation between Gulf and CompoSecure is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure 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 CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Gulf Island i.e., Gulf Island and CompoSecure go up and down completely randomly.

Pair Corralation between Gulf Island and CompoSecure

Given the investment horizon of 90 days Gulf Island Fabrication is expected to generate 0.65 times more return on investment than CompoSecure. However, Gulf Island Fabrication is 1.53 times less risky than CompoSecure. It trades about -0.02 of its potential returns per unit of risk. CompoSecure is currently generating about -0.07 per unit of risk. If you would invest  676.00  in Gulf Island Fabrication on December 30, 2024 and sell it today you would lose (23.00) from holding Gulf Island Fabrication or give up 3.4% of portfolio value over 90 days.

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

Gulf Island Fabrication  vs.  CompoSecure

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 fairly strong technical and fundamental indicators, Gulf Island is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

CompoSecure

Risk-Adjusted Performance

Very Weak

Over the last 90 days CompoSecure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gulf Island and CompoSecure

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

The idea behind Gulf Island Fabrication and CompoSecure 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.