Correlation Between Gulf Island and Dassault Aviation

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

Diversification Opportunities for Gulf Island and Dassault Aviation

-0.45

Correlation Coefficient

Gulf Island  Dassault Aviation

Very good diversification

The 3 months correlation between Gulf and Dassault is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Dassault Aviation SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Aviation 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 Dassault Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Aviation has no effect on the direction of Gulf Island i.e., Gulf Island and Dassault Aviation go up and down completely randomly.

Pair Corralation between Gulf Island and Dassault Aviation

Given the investment horizon of 90 days Gulf Island Fabrication is expected to under-perform the Dassault Aviation. But the stock apears to be less risky and, when comparing its historical volatility, Gulf Island Fabrication is 1.57 times less risky than Dassault Aviation. The stock trades about -0.1 of its potential returns per unit of risk. The Dassault Aviation SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  20,770  in Dassault Aviation SA on October 17, 2024 and sell it today you would earn a total of  682.00  from holding Dassault Aviation SA or generate 3.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Gulf Island Fabrication  vs.  Dassault Aviation SA

Gulf Island Fabrication

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 8 (%) 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.

Dassault Aviation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Aviation SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dassault Aviation 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 Dassault Aviation

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

The idea behind Gulf Island Fabrication and Dassault Aviation SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.