Correlation Between WHA Utilities and Gulf Energy
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
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
WHA Utilities and vs. Gulf Energy Development
Performance |
Timeline |
WHA Utilities |
Gulf Energy Development |
WHA Utilities and Gulf Energy Volatility Contrast
Predicted Return Density |
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.WHA Utilities vs. WHA Public | ||
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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