Correlation Between KEY Petroleum and Hammer Metals

Can any of the company-specific risk be diversified away by investing in both KEY Petroleum and Hammer Metals 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 KEY Petroleum and Hammer Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for KEY Petroleum and Hammer Metals

-0.5

Correlation Coefficient

KEY Petroleum  Hammer Metals

Very good diversification

The 3 months correlation between KEY and Hammer is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding KEY Petroleum and Hammer Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammer Metals and KEY Petroleum 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 KEY Petroleum are associated (or correlated) with Hammer Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammer Metals has no effect on the direction of KEY Petroleum i.e., KEY Petroleum and Hammer Metals go up and down completely randomly.

Pair Corralation between KEY Petroleum and Hammer Metals

Assuming the 90 days trading horizon KEY Petroleum is expected to generate 1.18 times more return on investment than Hammer Metals. However, KEY Petroleum is 1.18 times more volatile than Hammer Metals. It trades about 0.15 of its potential returns per unit of risk. Hammer Metals is currently generating about 0.05 per unit of risk. If you would invest  4.00  in KEY Petroleum on April 10, 2025 and sell it today you would earn a total of  0.90  from holding KEY Petroleum or generate 22.5% return on investment over 90 days.

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

KEY Petroleum  vs.  Hammer Metals

KEY Petroleum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KEY Petroleum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, KEY Petroleum unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hammer Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hammer Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hammer Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KEY Petroleum and Hammer Metals

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

The idea behind KEY Petroleum and Hammer Metals 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.