Correlation Between Kelt Exploration and Yangarra Resources

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

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

Diversification Opportunities for Kelt Exploration and Yangarra Resources

0.74

Correlation Coefficient

Kelt Exploration  Yangarra Resources

Poor diversification

The 3 months correlation between Kelt and Yangarra is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kelt Exploration and Yangarra Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yangarra Resources 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 Yangarra Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yangarra Resources has no effect on the direction of Kelt Exploration i.e., Kelt Exploration and Yangarra Resources go up and down completely randomly.

Pair Corralation between Kelt Exploration and Yangarra Resources

Assuming the 90 days trading horizon Kelt Exploration is expected to under-perform the Yangarra Resources. But the stock apears to be less risky and, when comparing its historical volatility, Kelt Exploration is 1.18 times less risky than Yangarra Resources. The stock trades about -0.04 of its potential returns per unit of risk. The Yangarra Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Yangarra Resources on December 1, 2024 and sell it today you would earn a total of  5.00  from holding Yangarra Resources or generate 4.95% 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.  Yangarra Resources

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.

Yangarra Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yangarra Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Yangarra Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kelt Exploration and Yangarra Resources

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

The idea behind Kelt Exploration and Yangarra Resources 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.