Correlation Between Gulf Energy and AJ Plast

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

Diversification Opportunities for Gulf Energy and AJ Plast

0.53

Correlation Coefficient

Gulf Energy  AJ Plast

Very weak diversification

The 3 months correlation between Gulf and AJ Plast is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and AJ Plast Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ Plast Public 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 AJ Plast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ Plast Public has no effect on the direction of Gulf Energy i.e., Gulf Energy and AJ Plast go up and down completely randomly.

Pair Corralation between Gulf Energy and AJ Plast

Assuming the 90 days trading horizon Gulf Energy Development is expected to generate 0.73 times more return on investment than AJ Plast. However, Gulf Energy Development is 1.37 times less risky than AJ Plast. It trades about -0.1 of its potential returns per unit of risk. AJ Plast Public is currently generating about -0.18 per unit of risk. If you would invest  5,846  in Gulf Energy Development on December 30, 2024 and sell it today you would lose (871.00) from holding Gulf Energy Development or give up 14.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Gulf Energy Development  vs.  AJ Plast Public

Gulf Energy Development

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gulf Energy Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

AJ Plast Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days AJ Plast Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Gulf Energy and AJ Plast

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

The idea behind Gulf Energy Development and AJ Plast Public 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .