Correlation Between Tredegar and Gulf Island

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

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

Diversification Opportunities for Tredegar and Gulf Island

0.54

Correlation Coefficient

Tredegar  Gulf Island

Very weak diversification

The 3 months correlation between Tredegar and Gulf is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Tredegar 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 Tredegar 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 Tredegar 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 Tredegar i.e., Tredegar and Gulf Island go up and down completely randomly.

Pair Corralation between Tredegar and Gulf Island

Allowing for the 90-day total investment horizon Tredegar is expected to generate 1.18 times more return on investment than Gulf Island. However, Tredegar is 1.18 times more volatile than Gulf Island Fabrication. It trades about 0.04 of its potential returns per unit of risk. Gulf Island Fabrication is currently generating about -0.02 per unit of risk. If you would invest  756.00  in Tredegar on December 28, 2024 and sell it today you would earn a total of  38.00  from holding Tredegar or generate 5.03% return on investment over 90 days.

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

Tredegar  vs.  Gulf Island Fabrication

Tredegar

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tredegar are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Tredegar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Tredegar and Gulf Island

The main advantage of trading using opposite Tredegar and Gulf Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tredegar 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 Tredegar 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.