Correlation Between WHA Utilities and Gulf Energy

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Can any of the company-specific risk be diversified away by investing in both WHA Utilities and Gulf 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 WHA Utilities and Gulf Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WHA Utilities and and Gulf Energy Development, you can compare the effects of market volatilities on WHA Utilities and Gulf 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 WHA Utilities with a short position of Gulf Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of WHA Utilities and Gulf Energy.

Diversification Opportunities for WHA Utilities and Gulf Energy

WHAGulfDiversified AwayWHAGulfDiversified Away100%
0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between WHA and Gulf is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding WHA Utilities and and Gulf Energy Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Energy Development and WHA Utilities 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 WHA Utilities and are associated (or correlated) with Gulf Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Energy Development has no effect on the direction of WHA Utilities i.e., WHA Utilities and Gulf Energy go up and down completely randomly.

Pair Corralation between WHA Utilities and Gulf Energy

Assuming the 90 days trading horizon WHA Utilities and is expected to under-perform the Gulf Energy. But the stock apears to be less risky and, when comparing its historical volatility, WHA Utilities and is 1.05 times less risky than Gulf Energy. The stock trades about -0.18 of its potential returns per unit of risk. The Gulf Energy Development is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  6,575  in Gulf Energy Development on October 16, 2024 and sell it today you would lose (775.00) from holding Gulf Energy Development or give up 11.79% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

WHA Utilities and  vs.  Gulf Energy Development

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 05101520
JavaScript chart by amCharts 3.21.15WHAUP GULF
       Timeline  
WHA Utilities 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days WHA Utilities and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan4.24.44.64.855.25.4
Gulf Energy Development 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gulf Energy Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan5658606264666870

WHA Utilities and Gulf Energy Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.86-2.89-1.92-0.950.01540.911.832.763.68 0.0500.0550.0600.0650.0700.0750.0800.085
JavaScript chart by amCharts 3.21.15WHAUP GULF
       Returns  

Pair Trading with WHA Utilities and Gulf Energy

The main advantage of trading using opposite WHA Utilities and Gulf Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WHA Utilities position performs unexpectedly, Gulf 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 Gulf Energy will offset losses from the drop in Gulf Energy's long position.
The idea behind WHA Utilities and and Gulf Energy Development 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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