Correlation Between Kelt Exploration and Pancontinental Oil

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

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

Diversification Opportunities for Kelt Exploration and Pancontinental Oil

0.2

Correlation Coefficient

Kelt Exploration  Pancontinental Oil

Modest diversification

The 3 months correlation between Kelt and Pancontinental is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kelt Exploration and Pancontinental Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pancontinental Oil Gas 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 Pancontinental Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pancontinental Oil Gas has no effect on the direction of Kelt Exploration i.e., Kelt Exploration and Pancontinental Oil go up and down completely randomly.

Pair Corralation between Kelt Exploration and Pancontinental Oil

Assuming the 90 days horizon Kelt Exploration is expected to under-perform the Pancontinental Oil. But the pink sheet apears to be less risky and, when comparing its historical volatility, Kelt Exploration is 7.08 times less risky than Pancontinental Oil. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Pancontinental Oil Gas is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.64  in Pancontinental Oil Gas on September 5, 2024 and sell it today you would lose (0.26) from holding Pancontinental Oil Gas or give up 15.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Kelt Exploration  vs.  Pancontinental Oil Gas

Kelt Exploration

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kelt Exploration are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kelt Exploration may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pancontinental Oil Gas

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pancontinental Oil Gas are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Pancontinental Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kelt Exploration and Pancontinental Oil

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

The idea behind Kelt Exploration and Pancontinental Oil Gas 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.