Correlation Between Gulf Island and Southern BancShares

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

Diversification Opportunities for Gulf Island and Southern BancShares

0.86

Correlation Coefficient

Gulf Island  Southern BancShares

Very poor diversification

The 3 months correlation between Gulf and Southern is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Southern BancShares NC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern BancShares 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 Southern BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern BancShares has no effect on the direction of Gulf Island i.e., Gulf Island and Southern BancShares go up and down completely randomly.

Pair Corralation between Gulf Island and Southern BancShares

Given the investment horizon of 90 days Gulf Island Fabrication is expected to generate 1.7 times more return on investment than Southern BancShares. However, Gulf Island is 1.7 times more volatile than Southern BancShares NC. It trades about 0.08 of its potential returns per unit of risk. Southern BancShares NC is currently generating about 0.1 per unit of risk. If you would invest  339.00  in Gulf Island Fabrication on October 3, 2024 and sell it today you would earn a total of  342.00  from holding Gulf Island Fabrication or generate 100.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	70.05%
Values	Daily Returns

Gulf Island Fabrication  vs.  Southern BancShares NC

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.

Southern BancShares

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern BancShares NC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Southern BancShares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Island and Southern BancShares

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

The idea behind Gulf Island Fabrication and Southern BancShares NC 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.