Correlation Between Kelt Exploration and Cardinal Energy

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

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

Diversification Opportunities for Kelt Exploration and Cardinal Energy

0.67

Correlation Coefficient

Kelt Exploration  Cardinal Energy

Poor diversification

The 3 months correlation between Kelt and Cardinal is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Kelt Exploration and Cardinal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Energy and Kelt Exploration 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 Kelt Exploration are associated (or correlated) with Cardinal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Energy has no effect on the direction of Kelt Exploration i.e., Kelt Exploration and Cardinal Energy go up and down completely randomly.

Pair Corralation between Kelt Exploration and Cardinal Energy

Assuming the 90 days trading horizon Kelt Exploration is expected to generate 6.36 times less return on investment than Cardinal Energy. In addition to that, Kelt Exploration is 1.52 times more volatile than Cardinal Energy. It trades about 0.0 of its total potential returns per unit of risk. Cardinal Energy is currently generating about 0.04 per unit of volatility. If you would invest  630.00  in Cardinal Energy on December 29, 2024 and sell it today you would earn a total of  19.00  from holding Cardinal Energy or generate 3.02% return on investment over 90 days.

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

Kelt Exploration  vs.  Cardinal Energy

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. In spite of very healthy essential indicators, Kelt Exploration is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cardinal Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cardinal Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kelt Exploration and Cardinal Energy

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

The idea behind Kelt Exploration and Cardinal 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.