Correlation Between Kelt Exploration and Civitas Resources

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

Diversification Opportunities for Kelt Exploration and Civitas Resources

0.06

Correlation Coefficient

Kelt Exploration  Civitas Resources

Significant diversification

The 3 months correlation between Kelt and Civitas is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kelt Exploration and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas 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 Civitas Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civitas Resources has no effect on the direction of Kelt Exploration i.e., Kelt Exploration and Civitas Resources go up and down completely randomly.

Pair Corralation between Kelt Exploration and Civitas Resources

Assuming the 90 days horizon Kelt Exploration is expected to generate 0.44 times more return on investment than Civitas Resources. However, Kelt Exploration is 2.28 times less risky than Civitas Resources. It trades about 0.03 of its potential returns per unit of risk. Civitas Resources is currently generating about -0.03 per unit of risk. If you would invest  440.00  in Kelt Exploration on September 13, 2024 and sell it today you would earn a total of  14.00  from holding Kelt Exploration or generate 3.18% return on investment over 90 days.

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

Kelt Exploration  vs.  Civitas Resources

Kelt Exploration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kelt Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Kelt Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Civitas Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Civitas Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Kelt Exploration and Civitas Resources

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

The idea behind Kelt Exploration and Civitas 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.