Correlation Between Gulf Island and Wise Plc

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

Diversification Opportunities for Gulf Island and Wise Plc

0.89

Correlation Coefficient

Gulf Island  Wise Plc

Very poor diversification

The 3 months correlation between Gulf and Wise is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise 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 Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of Gulf Island i.e., Gulf Island and Wise Plc go up and down completely randomly.

Pair Corralation between Gulf Island and Wise Plc

Given the investment horizon of 90 days Gulf Island Fabrication is expected to under-perform the Wise Plc. But the stock apears to be less risky and, when comparing its historical volatility, Gulf Island Fabrication is 1.03 times less risky than Wise Plc. The stock trades about -0.08 of its potential returns per unit of risk. The Wise plc is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  1,104  in Wise plc on September 22, 2024 and sell it today you would earn a total of  217.00  from holding Wise plc or generate 19.66% return on investment over 90 days.

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

Gulf Island Fabrication  vs.  Wise plc

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.

Wise plc

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Wise Plc showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Island and Wise Plc

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

The idea behind Gulf Island Fabrication and Wise 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.

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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 Stocks Directory module to find actively traded stocks across global markets.