Correlation Between Gulf Energy and Carabao Group

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

Diversification Opportunities for Gulf Energy and Carabao Group

0.39

Correlation Coefficient

Gulf Energy  Carabao Group

Weak diversification

The 3 months correlation between Gulf and Carabao is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and Carabao Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carabao Group 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 Carabao Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carabao Group Public has no effect on the direction of Gulf Energy i.e., Gulf Energy and Carabao Group go up and down completely randomly.

Pair Corralation between Gulf Energy and Carabao Group

Assuming the 90 days trading horizon Gulf Energy Development is expected to under-perform the Carabao Group. In addition to that, Gulf Energy is 1.36 times more volatile than Carabao Group Public. It trades about -0.1 of its total potential returns per unit of risk. Carabao Group Public is currently generating about 0.04 per unit of volatility. If you would invest  7,900  in Carabao Group Public on September 27, 2024 and sell it today you would earn a total of  75.00  from holding Carabao Group Public or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gulf Energy Development  vs.  Carabao Group Public

Gulf Energy Development

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Energy Development are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Gulf Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Carabao Group Public

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carabao Group Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Carabao Group is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Gulf Energy and Carabao Group

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

The idea behind Gulf Energy Development and Carabao Group 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.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.