Correlation Between Gulf Energy and WHA Utilities

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

Diversification Opportunities for Gulf Energy and WHA Utilities

0.88

Correlation Coefficient

Gulf Energy  WHA Utilities

Very poor diversification

The 3 months correlation between Gulf and WHA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and WHA Utilities and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WHA Utilities 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 WHA Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WHA Utilities has no effect on the direction of Gulf Energy i.e., Gulf Energy and WHA Utilities go up and down completely randomly.

Pair Corralation between Gulf Energy and WHA Utilities

Assuming the 90 days trading horizon Gulf Energy Development is expected to generate 0.98 times more return on investment than WHA Utilities. However, Gulf Energy Development is 1.02 times less risky than WHA Utilities. It trades about 0.04 of its potential returns per unit of risk. WHA Utilities and is currently generating about 0.04 per unit of risk. If you would invest  5,675  in Gulf Energy Development on September 23, 2024 and sell it today you would earn a total of  250.00  from holding Gulf Energy Development or generate 4.41% return on investment over 90 days.

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

Gulf Energy Development  vs.  WHA Utilities and

Gulf Energy Development

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Energy Development are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Gulf Energy is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

WHA Utilities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WHA Utilities and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, WHA Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gulf Energy and WHA Utilities

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

The idea behind Gulf Energy Development and WHA Utilities and 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.