Correlation Between Empire Global and Gulf Keystone

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

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

Diversification Opportunities for Empire Global and Gulf Keystone

-0.55

Correlation Coefficient

Empire Global  Gulf Keystone

Excellent diversification

The 3 months correlation between Empire and Gulf is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Empire Global Gaming and Gulf Keystone Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Keystone Petroleum and Empire Global 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 Empire Global Gaming are associated (or correlated) with Gulf Keystone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Keystone Petroleum has no effect on the direction of Empire Global i.e., Empire Global and Gulf Keystone go up and down completely randomly.

Pair Corralation between Empire Global and Gulf Keystone

Given the investment horizon of 90 days Empire Global Gaming is expected to generate 60.07 times more return on investment than Gulf Keystone. However, Empire Global is 60.07 times more volatile than Gulf Keystone Petroleum. It trades about 0.28 of its potential returns per unit of risk. Gulf Keystone Petroleum is currently generating about 0.19 per unit of risk. If you would invest  0.00  in Empire Global Gaming on December 28, 2024 and sell it today you would earn a total of  0.01  from holding Empire Global Gaming or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	23.64%
Values	Daily Returns

Empire Global Gaming  vs.  Gulf Keystone Petroleum

Empire Global Gaming

Risk-Adjusted Performance

Solid

Over the last 90 days Empire Global Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unfluctuating technical and fundamental indicators, Empire Global reported solid returns over the last few months and may actually be approaching a breakup point.

Gulf Keystone Petroleum

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Keystone Petroleum are ranked lower than 14 (%) 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.

Pair Trading with Empire Global and Gulf Keystone

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

The idea behind Empire Global Gaming and Gulf Keystone 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.