Correlation Between Marstons PLC and Kelt Exploration

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

By analyzing existing cross correlation between Marstons PLC and Kelt Exploration, you can compare the effects of market volatilities on Marstons PLC and Kelt Exploration 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 Marstons PLC with a short position of Kelt Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marstons PLC and Kelt Exploration.

Diversification Opportunities for Marstons PLC and Kelt Exploration

0.75

Correlation Coefficient

Marstons PLC  Kelt Exploration

Poor diversification

The 3 months correlation between Marstons and Kelt is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Kelt Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kelt Exploration and Marstons PLC 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 Marstons PLC are associated (or correlated) with Kelt Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kelt Exploration has no effect on the direction of Marstons PLC i.e., Marstons PLC and Kelt Exploration go up and down completely randomly.

Pair Corralation between Marstons PLC and Kelt Exploration

Assuming the 90 days horizon Marstons PLC is expected to generate 0.9 times more return on investment than Kelt Exploration. However, Marstons PLC is 1.11 times less risky than Kelt Exploration. It trades about 0.15 of its potential returns per unit of risk. Kelt Exploration is currently generating about 0.13 per unit of risk. If you would invest  45.00  in Marstons PLC on May 7, 2025 and sell it today you would earn a total of  13.00  from holding Marstons PLC or generate 28.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Marstons PLC  vs.  Kelt Exploration

Marstons PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marstons PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Marstons PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Kelt Exploration

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kelt Exploration are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kelt Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marstons PLC and Kelt Exploration

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

The idea behind Marstons PLC and Kelt Exploration 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.