Correlation Between Gulf Island and Worthington Industries

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

Diversification Opportunities for Gulf Island and Worthington Industries

-0.31

Correlation Coefficient

Gulf Island  Worthington Industries

Very good diversification

The 3 months correlation between Gulf and Worthington is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Worthington Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington 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 Worthington Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Industries has no effect on the direction of Gulf Island i.e., Gulf Island and Worthington Industries go up and down completely randomly.

Pair Corralation between Gulf Island and Worthington Industries

Given the investment horizon of 90 days Gulf Island Fabrication is expected to under-perform the Worthington Industries. But the stock apears to be less risky and, when comparing its historical volatility, Gulf Island Fabrication is 1.11 times less risky than Worthington Industries. The stock trades about -0.03 of its potential returns per unit of risk. The Worthington Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,074  in Worthington Industries on November 28, 2024 and sell it today you would earn a total of  189.00  from holding Worthington Industries or generate 4.64% return on investment over 90 days.

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

Gulf Island Fabrication  vs.  Worthington 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.

Worthington Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Worthington Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Worthington Industries may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Gulf Island and Worthington Industries

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

The idea behind Gulf Island Fabrication and Worthington 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.