Correlation Between GulfSlope Energy and SANUWAVE Health

Can any of the company-specific risk be diversified away by investing in both GulfSlope Energy and SANUWAVE Health 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 GulfSlope Energy and SANUWAVE Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GulfSlope Energy and SANUWAVE Health, you can compare the effects of market volatilities on GulfSlope Energy and SANUWAVE Health 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 GulfSlope Energy with a short position of SANUWAVE Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of GulfSlope Energy and SANUWAVE Health.

Diversification Opportunities for GulfSlope Energy and SANUWAVE Health

0.0

Correlation Coefficient

GulfSlope Energy  SANUWAVE Health

Pay attention - limited upside

The 3 months correlation between GulfSlope and SANUWAVE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GulfSlope Energy and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health and GulfSlope Energy 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 GulfSlope Energy are associated (or correlated) with SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of GulfSlope Energy i.e., GulfSlope Energy and SANUWAVE Health go up and down completely randomly.

Pair Corralation between GulfSlope Energy and SANUWAVE Health

Given the investment horizon of 90 days GulfSlope Energy is expected to generate 5.25 times more return on investment than SANUWAVE Health. However, GulfSlope Energy is 5.25 times more volatile than SANUWAVE Health. It trades about 0.04 of its potential returns per unit of risk. SANUWAVE Health is currently generating about 0.07 per unit of risk. If you would invest  0.80  in GulfSlope Energy on December 5, 2024 and sell it today you would lose (0.79) from holding GulfSlope Energy or give up 98.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.17%
Values	Daily Returns

GulfSlope Energy  vs.  SANUWAVE Health

GulfSlope Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days GulfSlope Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, GulfSlope Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SANUWAVE Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SANUWAVE Health are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SANUWAVE Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GulfSlope Energy and SANUWAVE Health

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

The idea behind GulfSlope Energy and SANUWAVE Health 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.