Correlation Between Gulf Keystone and Crescent Energy

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

Diversification Opportunities for Gulf Keystone and Crescent Energy

0.73

Correlation Coefficient

Gulf Keystone  Crescent Energy

Poor diversification

The 3 months correlation between Gulf and Crescent is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Keystone Petroleum and Crescent Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Energy 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 Crescent Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Energy has no effect on the direction of Gulf Keystone i.e., Gulf Keystone and Crescent Energy go up and down completely randomly.

Pair Corralation between Gulf Keystone and Crescent Energy

Assuming the 90 days horizon Gulf Keystone Petroleum is expected to generate 2.69 times more return on investment than Crescent Energy. However, Gulf Keystone is 2.69 times more volatile than Crescent Energy Co. It trades about 0.04 of its potential returns per unit of risk. Crescent Energy Co is currently generating about 0.05 per unit of risk. If you would invest  178.00  in Gulf Keystone Petroleum on October 5, 2024 and sell it today you would earn a total of  8.00  from holding Gulf Keystone Petroleum or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.56%
Values	Daily Returns

Gulf Keystone Petroleum  vs.  Crescent Energy Co

Gulf Keystone Petroleum

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Keystone Petroleum are ranked lower than 6 (%) 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.

Crescent Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Energy Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Crescent Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Keystone and Crescent Energy

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

The idea behind Gulf Keystone Petroleum and Crescent Energy Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.