Correlation Between PrairieSky Royalty and Kelt Exploration
Can any of the company-specific risk be diversified away by investing in both PrairieSky Royalty 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 PrairieSky Royalty and Kelt Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PrairieSky Royalty and Kelt Exploration, you can compare the effects of market volatilities on PrairieSky Royalty 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 PrairieSky Royalty with a short position of Kelt Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of PrairieSky Royalty and Kelt Exploration.
Diversification Opportunities for PrairieSky Royalty and Kelt Exploration
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PrairieSky and Kelt is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding PrairieSky Royalty and Kelt Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kelt Exploration and PrairieSky Royalty 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 PrairieSky Royalty 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 PrairieSky Royalty i.e., PrairieSky Royalty and Kelt Exploration go up and down completely randomly.
Pair Corralation between PrairieSky Royalty and Kelt Exploration
Assuming the 90 days horizon PrairieSky Royalty is expected to generate 0.66 times more return on investment than Kelt Exploration. However, PrairieSky Royalty is 1.51 times less risky than Kelt Exploration. It trades about 0.07 of its potential returns per unit of risk. Kelt Exploration is currently generating about 0.03 per unit of risk. If you would invest 1,765 in PrairieSky Royalty on September 1, 2024 and sell it today you would earn a total of 346.00 from holding PrairieSky Royalty or generate 19.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PrairieSky Royalty vs. Kelt Exploration
Performance |
| Timeline |
| PrairieSky Royalty |
| Kelt Exploration |
PrairieSky Royalty and Kelt Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PrairieSky Royalty and Kelt Exploration
The main advantage of trading using opposite PrairieSky Royalty and Kelt Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PrairieSky Royalty 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.| PrairieSky Royalty vs. Petroleo Brasileiro Petrobras | PrairieSky Royalty vs. Equinor ASA ADR | PrairieSky Royalty vs. Eni SpA ADR | PrairieSky Royalty vs. YPF Sociedad Anonima |
| Kelt Exploration vs. ROK Resources | Kelt Exploration vs. PetroShale | Kelt Exploration vs. Pieridae Energy Limited | Kelt Exploration vs. Bengal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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