Correlation Between Gulf Keystone and PetroTal Corp

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

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

Diversification Opportunities for Gulf Keystone and PetroTal Corp

-0.26

Correlation Coefficient

Gulf Keystone  PetroTal Corp

Very good diversification

The 3 months correlation between Gulf and PetroTal is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Keystone Petroleum and PetroTal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroTal Corp and Gulf Keystone 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 Keystone Petroleum are associated (or correlated) with PetroTal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroTal Corp has no effect on the direction of Gulf Keystone i.e., Gulf Keystone and PetroTal Corp go up and down completely randomly.

Pair Corralation between Gulf Keystone and PetroTal Corp

Assuming the 90 days horizon Gulf Keystone Petroleum is expected to generate 1.89 times more return on investment than PetroTal Corp. However, Gulf Keystone is 1.89 times more volatile than PetroTal Corp. It trades about 0.07 of its potential returns per unit of risk. PetroTal Corp is currently generating about -0.06 per unit of risk. If you would invest  160.00  in Gulf Keystone Petroleum on August 31, 2024 and sell it today you would earn a total of  23.00  from holding Gulf Keystone Petroleum or generate 14.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Gulf Keystone Petroleum  vs.  PetroTal Corp

Gulf Keystone Petroleum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Keystone Petroleum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gulf Keystone reported solid returns over the last few months and may actually be approaching a breakup point.

PetroTal Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroTal Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gulf Keystone and PetroTal Corp

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

The idea behind Gulf Keystone Petroleum and PetroTal Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.