Correlation Between Eastern Power and Gulf Energy
Can any of the company-specific risk be diversified away by investing in both Eastern Power 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 Eastern Power and Gulf Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Power Group and Gulf Energy Development, you can compare the effects of market volatilities on Eastern Power 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 Eastern Power with a short position of Gulf Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Power and Gulf Energy.
Diversification Opportunities for Eastern Power and Gulf Energy
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eastern and Gulf is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Power Group 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 Eastern Power 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 Eastern Power Group 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 Eastern Power i.e., Eastern Power and Gulf Energy go up and down completely randomly.
Pair Corralation between Eastern Power and Gulf Energy
Assuming the 90 days horizon Eastern Power Group is expected to under-perform the Gulf Energy. In addition to that, Eastern Power is 1.34 times more volatile than Gulf Energy Development. It trades about -0.05 of its total potential returns per unit of risk. Gulf Energy Development is currently generating about -0.02 per unit of volatility. If you would invest 5,257 in Gulf Energy Development on December 4, 2024 and sell it today you would lose (432.00) from holding Gulf Energy Development or give up 8.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.18% |
| Values | Daily Returns |
Eastern Power Group vs. Gulf Energy Development
Performance |
| Timeline |
| Eastern Power Group |
| Gulf Energy Development |
Eastern Power and Gulf Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Power and Gulf Energy
The main advantage of trading using opposite Eastern Power and Gulf Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Power 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.| Eastern Power vs. BCPG Public | Eastern Power vs. Diamond Building Products | Eastern Power vs. Earth Tech Environment | Eastern Power vs. TPI Polene Power |
| Gulf Energy vs. Energy Absolute Public | Gulf Energy vs. BGrimm Power Public | Gulf Energy vs. Global Power Synergy | Gulf Energy vs. CP ALL Public |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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