Correlation Between Civitas Resources and Kelt Exploration

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

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

Diversification Opportunities for Civitas Resources and Kelt Exploration

0.48

Correlation Coefficient

Civitas Resources  Kelt Exploration

Very weak diversification

The 3 months correlation between Civitas and Kelt is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Civitas Resources and Kelt Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kelt Exploration and Civitas Resources 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 Civitas Resources are associated (or correlated) with Kelt Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kelt Exploration has no effect on the direction of Civitas Resources i.e., Civitas Resources and Kelt Exploration go up and down completely randomly.

Pair Corralation between Civitas Resources and Kelt Exploration

Assuming the 90 days horizon Civitas Resources is expected to generate 15.17 times more return on investment than Kelt Exploration. However, Civitas Resources is 15.17 times more volatile than Kelt Exploration. It trades about 0.14 of its potential returns per unit of risk. Kelt Exploration is currently generating about 0.01 per unit of risk. If you would invest  17.00  in Civitas Resources on December 28, 2024 and sell it today you would lose (14.00) from holding Civitas Resources or give up 82.35% of portfolio value over 90 days.

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

Civitas Resources  vs.  Kelt Exploration

Civitas Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Civitas Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain forward indicators, Civitas Resources demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Kelt Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kelt Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kelt Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Civitas Resources and Kelt Exploration

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

The idea behind Civitas Resources and Kelt Exploration 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 Transaction History module to view history of all your transactions and understand their impact on performance.