Correlation Between Worthington Industries and Gulf Island

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

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

Diversification Opportunities for Worthington Industries and Gulf Island

-0.12

Correlation Coefficient

Worthington Industries  Gulf Island

Good diversification

The 3 months correlation between Worthington and Gulf is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Worthington Industries 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 Worthington Industries 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 Worthington Industries 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 Worthington Industries i.e., Worthington Industries and Gulf Island go up and down completely randomly.

Pair Corralation between Worthington Industries and Gulf Island

Considering the 90-day investment horizon Worthington Industries is expected to generate 1.68 times more return on investment than Gulf Island. However, Worthington Industries is 1.68 times more volatile than Gulf Island Fabrication. It trades about 0.12 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  3,989  in Worthington Industries on December 29, 2024 and sell it today you would earn a total of  1,059  from holding Worthington Industries or generate 26.55% return on investment over 90 days.

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

Worthington Industries  vs.  Gulf Island Fabrication

Worthington Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Worthington Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Worthington Industries reported solid returns over the last few months and may actually be approaching a breakup point.

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 Worthington Industries and Gulf Island

The main advantage of trading using opposite Worthington Industries and Gulf Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worthington Industries 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 Worthington Industries 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.