Correlation Between Tronox Holdings and Gulf Resources

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

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

Diversification Opportunities for Tronox Holdings and Gulf Resources

0.75

Correlation Coefficient

Tronox Holdings  Gulf Resources

Poor diversification

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

Pair Corralation between Tronox Holdings and Gulf Resources

Given the investment horizon of 90 days Tronox Holdings PLC is expected to generate 0.67 times more return on investment than Gulf Resources. However, Tronox Holdings PLC is 1.5 times less risky than Gulf Resources. It trades about -0.02 of its potential returns per unit of risk. Gulf Resources is currently generating about -0.06 per unit of risk. If you would invest  1,517  in Tronox Holdings PLC on October 5, 2024 and sell it today you would lose (544.00) from holding Tronox Holdings PLC or give up 35.86% of portfolio value over 90 days.

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

Tronox Holdings PLC  vs.  Gulf Resources

Tronox Holdings PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tronox Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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

Pair Trading with Tronox Holdings and Gulf Resources

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

The idea behind Tronox Holdings PLC and Gulf Resources 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.