Correlation Between Horizon Oil and Gulf Keystone
Can any of the company-specific risk be diversified away by investing in both Horizon Oil 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 Horizon Oil and Gulf Keystone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Horizon Oil Limited and Gulf Keystone Petroleum, you can compare the effects of market volatilities on Horizon Oil 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 Horizon Oil with a short position of Gulf Keystone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Oil and Gulf Keystone.
Diversification Opportunities for Horizon Oil and Gulf Keystone
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Horizon and Gulf is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Oil Limited 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 Horizon Oil 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 Horizon Oil Limited 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 Horizon Oil i.e., Horizon Oil and Gulf Keystone go up and down completely randomly.
Pair Corralation between Horizon Oil and Gulf Keystone
Assuming the 90 days horizon Horizon Oil is expected to generate 9.78 times less return on investment than Gulf Keystone. In addition to that, Horizon Oil is 1.67 times more volatile than Gulf Keystone Petroleum. It trades about 0.01 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 165.00 in Gulf Keystone Petroleum on August 31, 2024 and sell it today you would earn a total of 18.00 from holding Gulf Keystone Petroleum or generate 10.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Horizon Oil Limited vs. Gulf Keystone Petroleum
Performance |
| Timeline |
| Horizon Oil Limited |
| Gulf Keystone Petroleum |
Horizon Oil and Gulf Keystone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Horizon Oil and Gulf Keystone
The main advantage of trading using opposite Horizon Oil and Gulf Keystone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Oil 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.| Horizon Oil vs. Dno ASA | Horizon Oil vs. PetroShale | Horizon Oil vs. Enwell Energy plc | Horizon Oil vs. Tullow Oil plc |
| Gulf Keystone vs. San Leon Energy | Gulf Keystone vs. Enwell Energy plc | Gulf Keystone vs. Dno ASA | Gulf Keystone vs. Questerre Energy |
Check out your portfolio center.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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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