Correlation Between Flagship Investments and Key Petroleum

Can any of the company-specific risk be diversified away by investing in both Flagship Investments and Key Petroleum 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 Flagship Investments and Key Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Flagship Investments and Key Petroleum, you can compare the effects of market volatilities on Flagship Investments and Key Petroleum 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 Flagship Investments with a short position of Key Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flagship Investments and Key Petroleum.

Diversification Opportunities for Flagship Investments and Key Petroleum

-0.55

Correlation Coefficient

Flagship Investments  Key Petroleum

Excellent diversification

The 3 months correlation between Flagship and Key is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Flagship Investments and Key Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Key Petroleum and Flagship Investments 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 Flagship Investments are associated (or correlated) with Key Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Key Petroleum has no effect on the direction of Flagship Investments i.e., Flagship Investments and Key Petroleum go up and down completely randomly.

Pair Corralation between Flagship Investments and Key Petroleum

Assuming the 90 days trading horizon Flagship Investments is expected to generate 8.87 times less return on investment than Key Petroleum. But when comparing it to its historical volatility, Flagship Investments is 7.57 times less risky than Key Petroleum. It trades about 0.03 of its potential returns per unit of risk. Key Petroleum is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Key Petroleum on September 23, 2024 and sell it today you would lose (8.30) from holding Key Petroleum or give up 55.33% of portfolio value over 90 days.

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

Flagship Investments  vs.  Key Petroleum

Flagship Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flagship Investments are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Flagship Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Key Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Flagship Investments and Key Petroleum

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

The idea behind Flagship Investments and Key Petroleum 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.