Correlation Between Gulf Island and Magyar Telekom

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

Diversification Opportunities for Gulf Island and Magyar Telekom

0.83

Correlation Coefficient

Gulf Island  Magyar Telekom

Very poor diversification

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

Pair Corralation between Gulf Island and Magyar Telekom

Given the investment horizon of 90 days Gulf Island Fabrication is expected to generate 1.22 times more return on investment than Magyar Telekom. However, Gulf Island is 1.22 times more volatile than Magyar Telekom Plc. It trades about 0.15 of its potential returns per unit of risk. Magyar Telekom Plc is currently generating about 0.04 per unit of risk. If you would invest  532.00  in Gulf Island Fabrication on September 26, 2024 and sell it today you would earn a total of  164.00  from holding Gulf Island Fabrication or generate 30.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Gulf Island Fabrication  vs.  Magyar Telekom Plc

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.

Magyar Telekom Plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Telekom Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Magyar Telekom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gulf Island and Magyar Telekom

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

The idea behind Gulf Island Fabrication and Magyar Telekom Plc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..