Correlation Between Gulf Energy and CP ALL
Can any of the company-specific risk be diversified away by investing in both Gulf Energy and CP ALL 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 CP ALL 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 CP ALL Public, you can compare the effects of market volatilities on Gulf Energy and CP ALL 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 CP ALL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Energy and CP ALL.
Diversification Opportunities for Gulf Energy and CP ALL
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gulf and CPALL is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and CP ALL Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CP ALL Public 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 CP ALL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CP ALL Public has no effect on the direction of Gulf Energy i.e., Gulf Energy and CP ALL go up and down completely randomly.
Pair Corralation between Gulf Energy and CP ALL
Assuming the 90 days trading horizon Gulf Energy Development is expected to generate 1.16 times more return on investment than CP ALL. However, Gulf Energy is 1.16 times more volatile than CP ALL Public. It trades about 0.08 of its potential returns per unit of risk. CP ALL Public is currently generating about 0.01 per unit of risk. If you would invest 4,485 in Gulf Energy Development on August 28, 2024 and sell it today you would earn a total of 1,940 from holding Gulf Energy Development or generate 43.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.71% |
| Values | Daily Returns |
Gulf Energy Development vs. CP ALL Public
Performance |
| Timeline |
| Gulf Energy Development |
| CP ALL Public |
Gulf Energy and CP ALL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gulf Energy and CP ALL
The main advantage of trading using opposite Gulf Energy and CP ALL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gulf Energy position performs unexpectedly, CP ALL 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 CP ALL will offset losses from the drop in CP ALL's long position.| Gulf Energy vs. Energy Absolute Public | Gulf Energy vs. BGrimm Power Public | Gulf Energy vs. Global Power Synergy | Gulf Energy vs. CP ALL 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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