Correlation Between Suncorp and Key Petroleum

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

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

Diversification Opportunities for Suncorp and Key Petroleum

-0.4

Correlation Coefficient

Suncorp  Key Petroleum

Very good diversification

The 3 months correlation between Suncorp and Key is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Suncorp Group and Key Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Key Petroleum and Suncorp 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 Suncorp Group 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 Suncorp i.e., Suncorp and Key Petroleum go up and down completely randomly.

Pair Corralation between Suncorp and Key Petroleum

Assuming the 90 days trading horizon Suncorp Group is expected to generate 0.16 times more return on investment than Key Petroleum. However, Suncorp Group is 6.45 times less risky than Key Petroleum. It trades about 0.07 of its potential returns per unit of risk. Key Petroleum is currently generating about -0.08 per unit of risk. If you would invest  1,811  in Suncorp Group on September 24, 2024 and sell it today you would earn a total of  59.00  from holding Suncorp Group or generate 3.26% return on investment over 90 days.

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

Suncorp Group  vs.  Key Petroleum

Suncorp Group

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Suncorp Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Suncorp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Suncorp and Key Petroleum

The main advantage of trading using opposite Suncorp and Key Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suncorp 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 Suncorp Group 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.