Correlation Between Gulf Island and HAVN Life

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

Diversification Opportunities for Gulf Island and HAVN Life

0.36

Correlation Coefficient

Gulf Island  HAVN Life

Weak diversification

The 3 months correlation between Gulf and HAVN is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and HAVN Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HAVN Life Sciences 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 HAVN Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HAVN Life Sciences has no effect on the direction of Gulf Island i.e., Gulf Island and HAVN Life go up and down completely randomly.

Pair Corralation between Gulf Island and HAVN Life

Given the investment horizon of 90 days Gulf Island Fabrication is expected to under-perform the HAVN Life. But the stock apears to be less risky and, when comparing its historical volatility, Gulf Island Fabrication is 57.02 times less risky than HAVN Life. The stock trades about -0.03 of its potential returns per unit of risk. The HAVN Life Sciences is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.52  in HAVN Life Sciences on December 24, 2024 and sell it today you would lose (0.47) from holding HAVN Life Sciences or give up 90.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Gulf Island Fabrication  vs.  HAVN Life Sciences

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.

HAVN Life Sciences

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HAVN Life Sciences are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, HAVN Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Island and HAVN Life

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

The idea behind Gulf Island Fabrication and HAVN Life Sciences 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.