Correlation Between Gulf Keystone and Surge Energy

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

Diversification Opportunities for Gulf Keystone and Surge Energy

-0.13

Correlation Coefficient

Gulf Keystone  Surge Energy

Good diversification

The 3 months correlation between Gulf and Surge is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Keystone Petroleum and Surge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Surge 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 Surge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Surge Energy has no effect on the direction of Gulf Keystone i.e., Gulf Keystone and Surge Energy go up and down completely randomly.

Pair Corralation between Gulf Keystone and Surge Energy

Assuming the 90 days horizon Gulf Keystone Petroleum is expected to generate 1.86 times more return on investment than Surge Energy. However, Gulf Keystone is 1.86 times more volatile than Surge Energy. It trades about 0.19 of its potential returns per unit of risk. Surge Energy is currently generating about 0.09 per unit of risk. If you would invest  172.00  in Gulf Keystone Petroleum on December 28, 2024 and sell it today you would earn a total of  90.00  from holding Gulf Keystone Petroleum or generate 52.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

Gulf Keystone Petroleum  vs.  Surge Energy

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.

Surge Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Surge Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Surge Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gulf Keystone and Surge Energy

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

The idea behind Gulf Keystone Petroleum and Surge Energy 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.