Correlation Between ROK Resources and Gulf Keystone

Can any of the company-specific risk be diversified away by investing in both ROK 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 ROK 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 ROK Resources and Gulf Keystone Petroleum, you can compare the effects of market volatilities on ROK 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 ROK Resources with a short position of Gulf Keystone. Check out your portfolio center. Please also check ongoing floating volatility patterns of ROK Resources and Gulf Keystone.

Diversification Opportunities for ROK Resources and Gulf Keystone

-0.27

Correlation Coefficient

ROK Resources  Gulf Keystone

Very good diversification

The 3 months correlation between ROK and Gulf is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding ROK 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 ROK 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 ROK 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 ROK Resources i.e., ROK Resources and Gulf Keystone go up and down completely randomly.

Pair Corralation between ROK Resources and Gulf Keystone

Assuming the 90 days horizon ROK Resources is expected to generate 7.89 times less return on investment than Gulf Keystone. In addition to that, ROK Resources is 1.01 times more volatile than Gulf Keystone Petroleum. It trades about 0.02 of its total potential returns per unit of risk. Gulf Keystone Petroleum is currently generating about 0.18 per unit of volatility. If you would invest  175.00  in Gulf Keystone Petroleum on December 27, 2024 and sell it today you would earn a total of  87.00  from holding Gulf Keystone Petroleum or generate 49.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.22%
Values	Daily Returns

ROK Resources  vs.  Gulf Keystone Petroleum

ROK Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ROK Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ROK Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Gulf Keystone Petroleum

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Keystone Petroleum are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gulf Keystone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ROK Resources and Gulf Keystone

The main advantage of trading using opposite ROK Resources and Gulf Keystone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ROK 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 ROK 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .