Correlation Between Gulf Resources and Universal Stainless

Can any of the company-specific risk be diversified away by investing in both Gulf Resources and Universal Stainless 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 Resources and Universal Stainless into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gulf Resources and Universal Stainless Alloy, you can compare the effects of market volatilities on Gulf Resources and Universal Stainless 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 Resources with a short position of Universal Stainless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Resources and Universal Stainless.

Diversification Opportunities for Gulf Resources and Universal Stainless

-0.86

Correlation Coefficient

Gulf Resources  Universal Stainless

Pay attention - limited upside

The 3 months correlation between Gulf and Universal is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Resources and Universal Stainless Alloy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Stainless Alloy and Gulf Resources 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 Resources are associated (or correlated) with Universal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Stainless Alloy has no effect on the direction of Gulf Resources i.e., Gulf Resources and Universal Stainless go up and down completely randomly.

Pair Corralation between Gulf Resources and Universal Stainless

Given the investment horizon of 90 days Gulf Resources is expected to generate 16.01 times more return on investment than Universal Stainless. However, Gulf Resources is 16.01 times more volatile than Universal Stainless Alloy. It trades about 0.04 of its potential returns per unit of risk. Universal Stainless Alloy is currently generating about 0.19 per unit of risk. If you would invest  57.00  in Gulf Resources on August 30, 2024 and sell it today you would earn a total of  1.00  from holding Gulf Resources or generate 1.75% return on investment over 90 days.

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

Gulf Resources  vs.  Universal Stainless Alloy

Gulf Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gulf Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Universal Stainless Alloy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Gulf Resources and Universal Stainless

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

The idea behind Gulf Resources and Universal Stainless Alloy 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.