Correlation Between Texas Pacific and Gulfport Energy

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

By analyzing existing cross correlation between Texas Pacific Land and Gulfport Energy Operating, you can compare the effects of market volatilities on Texas Pacific and Gulfport 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 Texas Pacific with a short position of Gulfport Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Pacific and Gulfport Energy.

Diversification Opportunities for Texas Pacific and Gulfport Energy

0.71

Correlation Coefficient

Texas Pacific  Gulfport Energy

Poor diversification

The 3 months correlation between Texas and Gulfport is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Texas Pacific Land and Gulfport Energy Operating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulfport Energy Operating and Texas Pacific 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 Texas Pacific Land are associated (or correlated) with Gulfport Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulfport Energy Operating has no effect on the direction of Texas Pacific i.e., Texas Pacific and Gulfport Energy go up and down completely randomly.

Pair Corralation between Texas Pacific and Gulfport Energy

Considering the 90-day investment horizon Texas Pacific Land is expected to generate 1.18 times more return on investment than Gulfport Energy. However, Texas Pacific is 1.18 times more volatile than Gulfport Energy Operating. It trades about 0.16 of its potential returns per unit of risk. Gulfport Energy Operating is currently generating about 0.13 per unit of risk. If you would invest  51,276  in Texas Pacific Land on March 4, 2024 and sell it today you would earn a total of  10,155  from holding Texas Pacific Land or generate 19.8% return on investment over 90 days.

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

Texas Pacific Land  vs.  Gulfport Energy Operating

Texas Pacific Land

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Pacific Land are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Texas Pacific disclosed solid returns over the last few months and may actually be approaching a breakup point.

Gulfport Energy Operating

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulfport Energy Operating are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gulfport Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Pacific and Gulfport Energy

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

The idea behind Texas Pacific Land and Gulfport Energy Operating 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.