Correlation Between Gulf Energy and Absolute Clean

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

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

Diversification Opportunities for Gulf Energy and Absolute Clean

-0.8

Correlation Coefficient

Gulf Energy  Absolute Clean

Pay attention - limited upside

The 3 months correlation between Gulf and Absolute is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and Absolute Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Clean Energy and Gulf 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 Gulf Energy Development are associated (or correlated) with Absolute Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Clean Energy has no effect on the direction of Gulf Energy i.e., Gulf Energy and Absolute Clean go up and down completely randomly.

Pair Corralation between Gulf Energy and Absolute Clean

Assuming the 90 days trading horizon Gulf Energy is expected to generate 25.2 times less return on investment than Absolute Clean. But when comparing it to its historical volatility, Gulf Energy Development is 34.17 times less risky than Absolute Clean. It trades about 0.06 of its potential returns per unit of risk. Absolute Clean Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  188.00  in Absolute Clean Energy on September 12, 2024 and sell it today you would lose (56.00) from holding Absolute Clean Energy or give up 29.79% of portfolio value over 90 days.

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

Gulf Energy Development  vs.  Absolute Clean Energy

Gulf Energy Development

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Energy Development are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Gulf Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Absolute Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Gulf Energy and Absolute Clean

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

The idea behind Gulf Energy Development and Absolute Clean Energy 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.