Correlation Between Gulf Energy and Eastern Power
Can any of the company-specific risk be diversified away by investing in both Gulf Energy and Eastern Power 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 Eastern Power 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 Eastern Power Group, you can compare the effects of market volatilities on Gulf Energy and Eastern Power 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 Eastern Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Energy and Eastern Power.
Diversification Opportunities for Gulf Energy and Eastern Power
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Gulf and Eastern is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Energy Development and Eastern Power Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Power Group 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 Eastern Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Power Group has no effect on the direction of Gulf Energy i.e., Gulf Energy and Eastern Power go up and down completely randomly.
Pair Corralation between Gulf Energy and Eastern Power
Assuming the 90 days trading horizon Gulf Energy Development is expected to generate 0.62 times more return on investment than Eastern Power. However, Gulf Energy Development is 1.6 times less risky than Eastern Power. It trades about 0.09 of its potential returns per unit of risk. Eastern Power Group is currently generating about -0.07 per unit of risk. If you would invest 5,075 in Gulf Energy Development on November 2, 2024 and sell it today you would earn a total of 900.00 from holding Gulf Energy Development or generate 17.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gulf Energy Development vs. Eastern Power Group
Performance |
| Timeline |
| Gulf Energy Development |
| Eastern Power Group |
Gulf Energy and Eastern Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gulf Energy and Eastern Power
The main advantage of trading using opposite Gulf Energy and Eastern Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gulf Energy position performs unexpectedly, Eastern Power 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 Eastern Power will offset losses from the drop in Eastern Power'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 |
| Eastern Power vs. BCPG Public | Eastern Power vs. Diamond Building Products | Eastern Power vs. Earth Tech Environment | Eastern Power vs. TPI Polene Power |
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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