Correlation Between Gulf Island and Crayon Group

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

Diversification Opportunities for Gulf Island and Crayon Group

-0.83

Correlation Coefficient

Gulf Island  Crayon Group

Pay attention - limited upside

The 3 months correlation between Gulf and Crayon is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Crayon Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crayon Group Holding 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 Crayon Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crayon Group Holding has no effect on the direction of Gulf Island i.e., Gulf Island and Crayon Group go up and down completely randomly.

Pair Corralation between Gulf Island and Crayon Group

Given the investment horizon of 90 days Gulf Island Fabrication is expected to generate 0.81 times more return on investment than Crayon Group. However, Gulf Island Fabrication is 1.24 times less risky than Crayon Group. It trades about 0.04 of its potential returns per unit of risk. Crayon Group Holding is currently generating about 0.02 per unit of risk. If you would invest  495.00  in Gulf Island Fabrication on September 26, 2024 and sell it today you would earn a total of  201.00  from holding Gulf Island Fabrication or generate 40.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Gulf Island Fabrication  vs.  Crayon Group Holding

Gulf Island Fabrication

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 11 (%) 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.

Crayon Group Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crayon Group Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Crayon Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gulf Island and Crayon Group

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

The idea behind Gulf Island Fabrication and Crayon Group Holding 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.