Correlation Between Gulf Island and Haynes International

Can any of the company-specific risk be diversified away by investing in both Gulf Island and Haynes International 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 Island and Haynes International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gulf Island Fabrication and Haynes International, you can compare the effects of market volatilities on Gulf Island and Haynes International 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 Island with a short position of Haynes International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Island and Haynes International.

Diversification Opportunities for Gulf Island and Haynes International

0.56

Correlation Coefficient

Gulf Island  Haynes International

Very weak diversification

The 3 months correlation between Gulf and Haynes is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Haynes International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haynes International and Gulf Island 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 Island Fabrication are associated (or correlated) with Haynes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haynes International has no effect on the direction of Gulf Island i.e., Gulf Island and Haynes International go up and down completely randomly.

Pair Corralation between Gulf Island and Haynes International

Given the investment horizon of 90 days Gulf Island Fabrication is expected to under-perform the Haynes International. In addition to that, Gulf Island is 17.15 times more volatile than Haynes International. It trades about -0.1 of its total potential returns per unit of risk. Haynes International is currently generating about 0.13 per unit of volatility. If you would invest  5,998  in Haynes International on January 20, 2024 and sell it today you would earn a total of  37.00  from holding Haynes International or generate 0.62% return on investment over 90 days.

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

Gulf Island Fabrication  vs.  Haynes International

Gulf Island Fabrication

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gulf Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Haynes International

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Haynes International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Haynes International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Island and Haynes International

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

The idea behind Gulf Island Fabrication and Haynes International 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.