Correlation Between Gulf Island and PHX Energy

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

Diversification Opportunities for Gulf Island and PHX Energy

-0.33

Correlation Coefficient

Gulf Island  PHX Energy

Very good diversification

The 3 months correlation between Gulf and PHX is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and PHX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Energy Services 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 PHX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Energy Services has no effect on the direction of Gulf Island i.e., Gulf Island and PHX Energy go up and down completely randomly.

Pair Corralation between Gulf Island and PHX Energy

Given the investment horizon of 90 days Gulf Island Fabrication is expected to generate 0.99 times more return on investment than PHX Energy. However, Gulf Island Fabrication is 1.01 times less risky than PHX Energy. It trades about -0.07 of its potential returns per unit of risk. PHX Energy Services is currently generating about -0.31 per unit of risk. If you would invest  706.00  in Gulf Island Fabrication on September 24, 2024 and sell it today you would lose (20.00) from holding Gulf Island Fabrication or give up 2.83% of portfolio value over 90 days.

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

Gulf Island Fabrication  vs.  PHX Energy Services

Gulf Island Fabrication

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 9 (%) 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.

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gulf Island and PHX Energy

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

The idea behind Gulf Island Fabrication and PHX Energy Services 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.