Correlation Between Kelt Exploration and Advantage Oil

Can any of the company-specific risk be diversified away by investing in both Kelt Exploration and Advantage Oil 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 Kelt Exploration and Advantage Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kelt Exploration and Advantage Oil Gas, you can compare the effects of market volatilities on Kelt Exploration and Advantage Oil 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 Kelt Exploration with a short position of Advantage Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kelt Exploration and Advantage Oil.

Diversification Opportunities for Kelt Exploration and Advantage Oil

-0.03

Correlation Coefficient

Kelt Exploration  Advantage Oil

Good diversification

The 3 months correlation between Kelt and Advantage is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kelt Exploration and Advantage Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Oil Gas and Kelt Exploration 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 Kelt Exploration are associated (or correlated) with Advantage Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Oil Gas has no effect on the direction of Kelt Exploration i.e., Kelt Exploration and Advantage Oil go up and down completely randomly.

Pair Corralation between Kelt Exploration and Advantage Oil

Assuming the 90 days trading horizon Kelt Exploration is expected to generate 0.99 times more return on investment than Advantage Oil. However, Kelt Exploration is 1.01 times less risky than Advantage Oil. It trades about 0.1 of its potential returns per unit of risk. Advantage Oil Gas is currently generating about -0.01 per unit of risk. If you would invest  600.00  in Kelt Exploration on September 1, 2024 and sell it today you would earn a total of  73.00  from holding Kelt Exploration or generate 12.17% return on investment over 90 days.

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

Kelt Exploration  vs.  Advantage Oil Gas

Kelt Exploration

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kelt Exploration are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Kelt Exploration displayed solid returns over the last few months and may actually be approaching a breakup point.

Advantage Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advantage Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Advantage Oil is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kelt Exploration and Advantage Oil

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

The idea behind Kelt Exploration and Advantage Oil Gas 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.