Correlation Between Green Plains and Gulf Resources

Can any of the company-specific risk be diversified away by investing in both Green Plains and Gulf Resources 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 Green Plains and Gulf Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Green Plains Renewable and Gulf Resources, you can compare the effects of market volatilities on Green Plains and Gulf Resources 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 Green Plains with a short position of Gulf Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Plains and Gulf Resources.

Diversification Opportunities for Green Plains and Gulf Resources

-0.38

Correlation Coefficient

Green Plains  Gulf Resources

Very good diversification

The 3 months correlation between Green and Gulf is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Green Plains Renewable and Gulf Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Resources and Green Plains 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 Green Plains Renewable are associated (or correlated) with Gulf Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Resources has no effect on the direction of Green Plains i.e., Green Plains and Gulf Resources go up and down completely randomly.

Pair Corralation between Green Plains and Gulf Resources

Given the investment horizon of 90 days Green Plains Renewable is expected to under-perform the Gulf Resources. But the stock apears to be less risky and, when comparing its historical volatility, Green Plains Renewable is 1.37 times less risky than Gulf Resources. The stock trades about -0.18 of its potential returns per unit of risk. The Gulf Resources is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Gulf Resources on December 27, 2024 and sell it today you would earn a total of  19.00  from holding Gulf Resources or generate 35.85% return on investment over 90 days.

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

Green Plains Renewable  vs.  Gulf Resources

Green Plains Renewable

Risk-Adjusted Performance

Very Weak

Over the last 90 days Green Plains Renewable has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Gulf Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Gulf Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Green Plains and Gulf Resources

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

The idea behind Green Plains Renewable and Gulf Resources 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.