Correlation Between Gulf Keystone and Santos

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

Diversification Opportunities for Gulf Keystone and Santos

-0.66

Correlation Coefficient

Gulf Keystone  Santos

Excellent diversification

The 3 months correlation between Gulf and Santos is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Keystone Petroleum and Santos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos 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 Santos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos has no effect on the direction of Gulf Keystone i.e., Gulf Keystone and Santos go up and down completely randomly.

Pair Corralation between Gulf Keystone and Santos

Assuming the 90 days horizon Gulf Keystone Petroleum is expected to under-perform the Santos. But the pink sheet apears to be less risky and, when comparing its historical volatility, Gulf Keystone Petroleum is 2.99 times less risky than Santos. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Santos is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  445.00  in Santos on September 17, 2024 and sell it today you would lose (25.00) from holding Santos or give up 5.62% of portfolio value over 90 days.

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

Gulf Keystone Petroleum  vs.  Santos

Gulf Keystone Petroleum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Keystone Petroleum are ranked lower than 10 (%) 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.

Santos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santos has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic 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 Santos

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

The idea behind Gulf Keystone Petroleum and Santos 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.