Correlation Between Idemitsu Kosan and CVR Energy

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

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

Diversification Opportunities for Idemitsu Kosan and CVR Energy

0.85

Correlation Coefficient

Idemitsu Kosan  CVR Energy

Very poor diversification

The 3 months correlation between Idemitsu and CVR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Idemitsu Kosan CoLtd and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and Idemitsu Kosan 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 Idemitsu Kosan CoLtd are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Idemitsu Kosan i.e., Idemitsu Kosan and CVR Energy go up and down completely randomly.

Pair Corralation between Idemitsu Kosan and CVR Energy

Assuming the 90 days horizon Idemitsu Kosan CoLtd is expected to generate 0.22 times more return on investment than CVR Energy. However, Idemitsu Kosan CoLtd is 4.46 times less risky than CVR Energy. It trades about -0.07 of its potential returns per unit of risk. CVR Energy is currently generating about -0.05 per unit of risk. 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	Strong
Accuracy	98.48%
Values	Daily Returns

Idemitsu Kosan CoLtd  vs.  CVR Energy

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.

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Idemitsu Kosan and CVR Energy

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

The idea behind Idemitsu Kosan CoLtd and CVR Energy 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..