Correlation Between Gulf Resources and Valhi

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

By analyzing existing cross correlation between Gulf Resources and Valhi Inc, you can compare the effects of market volatilities on Gulf Resources and Valhi 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 Valhi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Resources and Valhi.

Diversification Opportunities for Gulf Resources and Valhi

-0.41

Correlation Coefficient

Gulf Resources  Valhi

Very good diversification

The 3 months correlation between Gulf and Valhi is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Resources and Valhi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valhi Inc 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 Valhi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valhi Inc has no effect on the direction of Gulf Resources i.e., Gulf Resources and Valhi go up and down completely randomly.

Pair Corralation between Gulf Resources and Valhi

Given the investment horizon of 90 days Gulf Resources is expected to generate 2.25 times more return on investment than Valhi. However, Gulf Resources is 2.25 times more volatile than Valhi Inc. It trades about 0.09 of its potential returns per unit of risk. Valhi Inc is currently generating about -0.14 per unit of risk. If you would invest  57.00  in Gulf Resources on December 26, 2024 and sell it today you would earn a total of  14.25  from holding Gulf Resources or generate 25.0% return on investment over 90 days.

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

Gulf Resources  vs.  Valhi Inc

Gulf Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Gulf Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Valhi Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valhi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Gulf Resources and Valhi

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

The idea behind Gulf Resources and Valhi Inc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.