Correlation Between Gulf Island and Processa Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Gulf Island and Processa Pharmaceuticals 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 Processa Pharmaceuticals 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 Processa Pharmaceuticals, you can compare the effects of market volatilities on Gulf Island and Processa Pharmaceuticals 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 Processa Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Island and Processa Pharmaceuticals.

Diversification Opportunities for Gulf Island and Processa Pharmaceuticals

-0.21

Correlation Coefficient

Gulf Island  Processa Pharmaceuticals

Very good diversification

The 3 months correlation between Gulf and Processa is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Processa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Processa Pharmaceuticals 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 Processa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Processa Pharmaceuticals has no effect on the direction of Gulf Island i.e., Gulf Island and Processa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Gulf Island and Processa Pharmaceuticals

Given the investment horizon of 90 days Gulf Island Fabrication is expected to under-perform the Processa Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Gulf Island Fabrication is 4.15 times less risky than Processa Pharmaceuticals. The stock trades about -0.04 of its potential returns per unit of risk. The Processa Pharmaceuticals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Processa Pharmaceuticals on April 29, 2025 and sell it today you would earn a total of  1.00  from holding Processa Pharmaceuticals or generate 4.35% return on investment over 90 days.

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

Gulf Island Fabrication  vs.  Processa Pharmaceuticals

Gulf Island Fabrication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gulf Island Fabrication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Gulf Island is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Processa Pharmaceuticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Processa Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Processa Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Island and Processa Pharmaceuticals

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

The idea behind Gulf Island Fabrication and Processa Pharmaceuticals 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.