Correlation Between Permian Resources and Gulf Keystone

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

By analyzing existing cross correlation between Permian Resources and Gulf Keystone Petroleum, you can compare the effects of market volatilities on Permian Resources and Gulf Keystone 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 Permian Resources with a short position of Gulf Keystone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and Gulf Keystone.

Diversification Opportunities for Permian Resources and Gulf Keystone

0.66

Correlation Coefficient

Permian Resources  Gulf Keystone

Poor diversification

The 3 months correlation between Permian and Gulf is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Gulf Keystone Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Keystone Petroleum and Permian Resources 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 Permian Resources are associated (or correlated) with Gulf Keystone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Keystone Petroleum has no effect on the direction of Permian Resources i.e., Permian Resources and Gulf Keystone go up and down completely randomly.

Pair Corralation between Permian Resources and Gulf Keystone

Allowing for the 90-day total investment horizon Permian Resources is expected to under-perform the Gulf Keystone. In addition to that, Permian Resources is 1.04 times more volatile than Gulf Keystone Petroleum. It trades about -0.16 of its total potential returns per unit of risk. Gulf Keystone Petroleum is currently generating about -0.11 per unit of volatility. If you would invest  196.00  in Gulf Keystone Petroleum on September 18, 2024 and sell it today you would lose (9.00) from holding Gulf Keystone Petroleum or give up 4.59% of portfolio value over 90 days.

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

Permian Resources  vs.  Gulf Keystone Petroleum

Permian Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Permian Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Gulf Keystone Petroleum

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Keystone Petroleum are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Gulf Keystone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Permian Resources and Gulf Keystone

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

The idea behind Permian Resources and Gulf Keystone Petroleum 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.