Correlation Between Mayville Engineering and Gulf Island

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

By analyzing existing cross correlation between Mayville Engineering Co and Gulf Island Fabrication, you can compare the effects of market volatilities on Mayville Engineering and Gulf Island 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 Mayville Engineering with a short position of Gulf Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mayville Engineering and Gulf Island.

Diversification Opportunities for Mayville Engineering and Gulf Island

0.75

Correlation Coefficient

Mayville Engineering  Gulf Island

Poor diversification

The 3 months correlation between Mayville and Gulf is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mayville Engineering Co and Gulf Island Fabrication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Island Fabrication and Mayville Engineering 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 Mayville Engineering Co are associated (or correlated) with Gulf Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Island Fabrication has no effect on the direction of Mayville Engineering i.e., Mayville Engineering and Gulf Island go up and down completely randomly.

Pair Corralation between Mayville Engineering and Gulf Island

Considering the 90-day investment horizon Mayville Engineering Co is expected to under-perform the Gulf Island. But the stock apears to be less risky and, when comparing its historical volatility, Mayville Engineering Co is 1.05 times less risky than Gulf Island. The stock trades about -0.11 of its potential returns per unit of risk. The Gulf Island Fabrication is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  676.00  in Gulf Island Fabrication on December 28, 2024 and sell it today you would lose (23.00) from holding Gulf Island Fabrication or give up 3.4% of portfolio value over 90 days.

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

Mayville Engineering Co  vs.  Gulf Island Fabrication

Mayville Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mayville Engineering Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Gulf Island Fabrication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gulf Island Fabrication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Gulf Island is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Mayville Engineering and Gulf Island

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

The idea behind Mayville Engineering Co and Gulf Island Fabrication 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.