Correlation Between Gulf Coast and US Energy
Can any of the company-specific risk be diversified away by investing in both Gulf Coast and US 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 Gulf Coast and US Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gulf Coast and US Energy Corp, you can compare the effects of market volatilities on Gulf Coast and US 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 Gulf Coast with a short position of US Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Coast and US Energy.
Diversification Opportunities for Gulf Coast and US Energy
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Gulf and USEG is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Coast and US Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Energy Corp and Gulf Coast 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 Coast are associated (or correlated) with US Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Energy Corp has no effect on the direction of Gulf Coast i.e., Gulf Coast and US Energy go up and down completely randomly.
Pair Corralation between Gulf Coast and US Energy
Assuming the 90 days horizon Gulf Coast is expected to generate 1.04 times less return on investment than US Energy. In addition to that, Gulf Coast is 1.23 times more volatile than US Energy Corp. It trades about 0.09 of its total potential returns per unit of risk. US Energy Corp is currently generating about 0.12 per unit of volatility. If you would invest 107.00 in US Energy Corp on September 1, 2024 and sell it today you would earn a total of 78.00 from holding US Energy Corp or generate 72.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gulf Coast vs. US Energy Corp
Performance |
| Timeline |
| Gulf Coast |
| US Energy Corp |
Gulf Coast and US Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gulf Coast and US Energy
The main advantage of trading using opposite Gulf Coast and US Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gulf Coast position performs unexpectedly, US 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 US Energy will offset losses from the drop in US Energy's long position.| Gulf Coast vs. San Leon Energy | Gulf Coast vs. Enwell Energy plc | Gulf Coast vs. Dno ASA | Gulf Coast vs. PetroShale |
| US Energy vs. PEDEVCO Corp | US Energy vs. Houston American Energy | US Energy vs. PHX Minerals | US Energy vs. Trio Petroleum Corp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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