Correlation Between Oil Natural and Keynote Financial

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

By analyzing existing cross correlation between Oil Natural Gas and Keynote Financial Services, you can compare the effects of market volatilities on Oil Natural and Keynote Financial 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 Oil Natural with a short position of Keynote Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Natural and Keynote Financial.

Diversification Opportunities for Oil Natural and Keynote Financial

0.37

Correlation Coefficient

Oil Natural  Keynote Financial

Weak diversification

The 3 months correlation between Oil and Keynote is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and Keynote Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keynote Financial and Oil Natural 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 Oil Natural Gas are associated (or correlated) with Keynote Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keynote Financial has no effect on the direction of Oil Natural i.e., Oil Natural and Keynote Financial go up and down completely randomly.

Pair Corralation between Oil Natural and Keynote Financial

Assuming the 90 days trading horizon Oil Natural is expected to generate 5.9 times less return on investment than Keynote Financial. But when comparing it to its historical volatility, Oil Natural Gas is 2.75 times less risky than Keynote Financial. It trades about 0.04 of its potential returns per unit of risk. Keynote Financial Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  24,753  in Keynote Financial Services on December 25, 2024 and sell it today you would earn a total of  5,184  from holding Keynote Financial Services or generate 20.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Oil Natural Gas  vs.  Keynote Financial Services

Oil Natural Gas

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Natural Gas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Oil Natural is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Keynote Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Keynote Financial Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Keynote Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oil Natural and Keynote Financial

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

The idea behind Oil Natural Gas and Keynote Financial Services 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.