Correlation Between Gulf Island and Mueller Industries

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

Diversification Opportunities for Gulf Island and Mueller Industries

0.08

Correlation Coefficient

Gulf Island  Mueller Industries

Significant diversification

The 3 months correlation between Gulf and Mueller is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Mueller Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mueller Industries 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 Mueller Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mueller Industries has no effect on the direction of Gulf Island i.e., Gulf Island and Mueller Industries go up and down completely randomly.

Pair Corralation between Gulf Island and Mueller Industries

Given the investment horizon of 90 days Gulf Island Fabrication is expected to under-perform the Mueller Industries. In addition to that, Gulf Island is 1.25 times more volatile than Mueller Industries. It trades about -0.02 of its total potential returns per unit of risk. Mueller Industries is currently generating about -0.02 per unit of volatility. If you would invest  7,952  in Mueller Industries on December 28, 2024 and sell it today you would lose (201.00) from holding Mueller Industries or give up 2.53% of portfolio value over 90 days.

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

Gulf Island Fabrication  vs.  Mueller Industries

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.

Mueller Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mueller Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Mueller Industries is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Gulf Island and Mueller Industries

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

The idea behind Gulf Island Fabrication and Mueller Industries 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.