Correlation Between Ampol and Idemitsu Kosan

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

By analyzing existing cross correlation between Ampol Ltd ADR and Idemitsu Kosan CoLtd, you can compare the effects of market volatilities on Ampol and Idemitsu Kosan 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 Ampol with a short position of Idemitsu Kosan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ampol and Idemitsu Kosan.

Diversification Opportunities for Ampol and Idemitsu Kosan

0.71

Correlation Coefficient

Ampol  Idemitsu Kosan

Poor diversification

The 3 months correlation between Ampol and Idemitsu is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ampol Ltd ADR and Idemitsu Kosan CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idemitsu Kosan CoLtd and Ampol 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 Ampol Ltd ADR are associated (or correlated) with Idemitsu Kosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idemitsu Kosan CoLtd has no effect on the direction of Ampol i.e., Ampol and Idemitsu Kosan go up and down completely randomly.

Pair Corralation between Ampol and Idemitsu Kosan

Assuming the 90 days horizon Ampol Ltd ADR is expected to under-perform the Idemitsu Kosan. In addition to that, Ampol is 2.02 times more volatile than Idemitsu Kosan CoLtd. It trades about -0.09 of its total potential returns per unit of risk. Idemitsu Kosan CoLtd is currently generating about -0.07 per unit of volatility. If you would invest  698.00  in Idemitsu Kosan CoLtd on September 16, 2024 and sell it today you would lose (30.00) from holding Idemitsu Kosan CoLtd or give up 4.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Ampol Ltd ADR  vs.  Idemitsu Kosan CoLtd

Ampol Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ampol Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Idemitsu Kosan CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Idemitsu Kosan CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Idemitsu Kosan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ampol and Idemitsu Kosan

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

The idea behind Ampol Ltd ADR and Idemitsu Kosan CoLtd 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.