Correlation Between PetroTal Corp and Gulf Keystone

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

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

Diversification Opportunities for PetroTal Corp and Gulf Keystone

0.48

Correlation Coefficient

PetroTal Corp  Gulf Keystone

Very weak diversification

The 3 months correlation between PetroTal and Gulf is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding PetroTal Corp 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 PetroTal Corp 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 PetroTal Corp 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 PetroTal Corp i.e., PetroTal Corp and Gulf Keystone go up and down completely randomly.

Pair Corralation between PetroTal Corp and Gulf Keystone

Assuming the 90 days horizon PetroTal Corp is expected to generate 0.6 times more return on investment than Gulf Keystone. However, PetroTal Corp is 1.66 times less risky than Gulf Keystone. It trades about 0.27 of its potential returns per unit of risk. Gulf Keystone Petroleum is currently generating about 0.03 per unit of risk. If you would invest  39.00  in PetroTal Corp on May 7, 2025 and sell it today you would earn a total of  13.00  from holding PetroTal Corp or generate 33.33% return on investment over 90 days.

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

PetroTal Corp  vs.  Gulf Keystone Petroleum

PetroTal Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PetroTal Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, PetroTal Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Gulf Keystone Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Keystone Petroleum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gulf Keystone is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PetroTal Corp and Gulf Keystone

The main advantage of trading using opposite PetroTal Corp and Gulf Keystone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroTal Corp 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 PetroTal Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.