Correlation Between Gulf Energy and CP ALL

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

Diversification Opportunities for Gulf Energy and CP ALL

0.32

Correlation Coefficient

Gulf Energy  CP ALL

Weak diversification

The 3 months correlation between Gulf and CPALL is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and CP ALL Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CP ALL 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 CP ALL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CP ALL Public has no effect on the direction of Gulf Energy i.e., Gulf Energy and CP ALL go up and down completely randomly.

Pair Corralation between Gulf Energy and CP ALL

Assuming the 90 days trading horizon Gulf Energy Development is expected to generate 1.52 times more return on investment than CP ALL. However, Gulf Energy is 1.52 times more volatile than CP ALL Public. It trades about 0.15 of its potential returns per unit of risk. CP ALL Public is currently generating about 0.02 per unit of risk. If you would invest  5,075  in Gulf Energy Development on September 3, 2024 and sell it today you would earn a total of  975.00  from holding Gulf Energy Development or generate 19.21% 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.  CP ALL Public

Gulf Energy Development

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Energy Development are ranked lower than 11 (%) 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.

CP ALL Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CP ALL Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, CP ALL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gulf Energy and CP ALL

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

The idea behind Gulf Energy Development and CP ALL 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.