Correlation Between Kelt Exploration and Canacol Energy

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

Diversification Opportunities for Kelt Exploration and Canacol Energy

-0.39

Correlation Coefficient

Kelt Exploration  Canacol Energy

Very good diversification

The 3 months correlation between Kelt and Canacol is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Kelt Exploration and Canacol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canacol 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 Canacol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canacol Energy has no effect on the direction of Kelt Exploration i.e., Kelt Exploration and Canacol Energy go up and down completely randomly.

Pair Corralation between Kelt Exploration and Canacol Energy

Assuming the 90 days trading horizon Kelt Exploration is expected to under-perform the Canacol Energy. But the stock apears to be less risky and, when comparing its historical volatility, Kelt Exploration is 1.71 times less risky than Canacol Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Canacol Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  396.00  in Canacol Energy on December 2, 2024 and sell it today you would lose (12.00) from holding Canacol Energy or give up 3.03% of portfolio value over 90 days.

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

Kelt Exploration  vs.  Canacol 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.

Canacol Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canacol Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Canacol 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 Canacol Energy

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

The idea behind Kelt Exploration and Canacol 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.