Correlation Between Gulf Energy and Com7 PCL

Can any of the company-specific risk be diversified away by investing in both Gulf Energy and Com7 PCL 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 Gulf Energy and Com7 PCL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gulf Energy Development and Com7 PCL, you can compare the effects of market volatilities on Gulf Energy and Com7 PCL 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 Gulf Energy with a short position of Com7 PCL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Energy and Com7 PCL.

Diversification Opportunities for Gulf Energy and Com7 PCL

0.09

Correlation Coefficient

Gulf Energy  Com7 PCL

Significant diversification

The 3 months correlation between Gulf and Com7 is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and Com7 PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Com7 PCL and Gulf Energy 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 Gulf Energy Development are associated (or correlated) with Com7 PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Com7 PCL has no effect on the direction of Gulf Energy i.e., Gulf Energy and Com7 PCL go up and down completely randomly.

Pair Corralation between Gulf Energy and Com7 PCL

Assuming the 90 days trading horizon Gulf Energy Development is expected to generate 0.67 times more return on investment than Com7 PCL. However, Gulf Energy Development is 1.49 times less risky than Com7 PCL. It trades about 0.0 of its potential returns per unit of risk. Com7 PCL is currently generating about -0.04 per unit of risk. If you would invest  4,458  in Gulf Energy Development on February 8, 2024 and sell it today you would lose (308.00) from holding Gulf Energy Development or give up 6.91% of portfolio value over 90 days.

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

Gulf Energy Development  vs.  Com7 PCL

Gulf Energy Development

Risk-Adjusted Performance

0 of 100

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 quite persistent basic indicators, Gulf Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Com7 PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Com7 PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Gulf Energy and Com7 PCL

The main advantage of trading using opposite Gulf Energy and Com7 PCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gulf Energy position performs unexpectedly, Com7 PCL 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 Com7 PCL will offset losses from the drop in Com7 PCL's long position.

The idea behind Gulf Energy Development and Com7 PCL 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.