Correlation Between Gulf Energy and Sermsang Power

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

Diversification Opportunities for Gulf Energy and Sermsang Power

-0.56

Correlation Coefficient

Gulf Energy  Sermsang Power

Excellent diversification

The 3 months correlation between Gulf and Sermsang is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and Sermsang Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sermsang Power 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 Sermsang Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sermsang Power has no effect on the direction of Gulf Energy i.e., Gulf Energy and Sermsang Power go up and down completely randomly.

Pair Corralation between Gulf Energy and Sermsang Power

Assuming the 90 days trading horizon Gulf Energy Development is expected to generate 1.91 times more return on investment than Sermsang Power. However, Gulf Energy is 1.91 times more volatile than Sermsang Power. It trades about 0.08 of its potential returns per unit of risk. Sermsang Power is currently generating about -0.13 per unit of risk. If you would invest  5,575  in Gulf Energy Development on September 15, 2024 and sell it today you would earn a total of  550.00  from holding Gulf Energy Development or generate 9.87% return on investment over 90 days.

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

Gulf Energy Development  vs.  Sermsang Power

Gulf Energy Development

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Energy Development are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Gulf Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sermsang Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sermsang Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic 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 Sermsang Power

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

The idea behind Gulf Energy Development and Sermsang Power 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.