Correlation Between Gulf Resources and Select Energy

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

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

Diversification Opportunities for Gulf Resources and Select Energy

-0.66

Correlation Coefficient

Gulf Resources  Select Energy

Excellent diversification

The 3 months correlation between Gulf and Select is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Resources and Select Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Energy Services 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 Select Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Energy Services has no effect on the direction of Gulf Resources i.e., Gulf Resources and Select Energy go up and down completely randomly.

Pair Corralation between Gulf Resources and Select Energy

Given the investment horizon of 90 days Gulf Resources is expected to generate 2.62 times more return on investment than Select Energy. However, Gulf Resources is 2.62 times more volatile than Select Energy Services. It trades about 0.02 of its potential returns per unit of risk. Select Energy Services is currently generating about -0.39 per unit of risk. If you would invest  62.00  in Gulf Resources on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Gulf Resources or generate 0.0% return on investment over 90 days.

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

Gulf Resources  vs.  Select Energy Services

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Select Energy Services

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Select Energy Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Select Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gulf Resources and Select Energy

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

The idea behind Gulf Resources and Select Energy Services 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.