Correlation Between Idemitsu Kosan and Eneos Holdings

Can any of the company-specific risk be diversified away by investing in both Idemitsu Kosan and Eneos Holdings 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 Eneos Holdings 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 Eneos Holdings ADR, you can compare the effects of market volatilities on Idemitsu Kosan and Eneos Holdings 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 Eneos Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Idemitsu Kosan and Eneos Holdings.

Diversification Opportunities for Idemitsu Kosan and Eneos Holdings

0.58

Correlation Coefficient

Idemitsu Kosan  Eneos Holdings

Very weak diversification

The 3 months correlation between Idemitsu and Eneos is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Idemitsu Kosan CoLtd and Eneos Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eneos Holdings ADR 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 Eneos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eneos Holdings ADR has no effect on the direction of Idemitsu Kosan i.e., Idemitsu Kosan and Eneos Holdings go up and down completely randomly.

Pair Corralation between Idemitsu Kosan and Eneos Holdings

Assuming the 90 days horizon Idemitsu Kosan CoLtd is expected to under-perform the Eneos Holdings. But the otc stock apears to be less risky and, when comparing its historical volatility, Idemitsu Kosan CoLtd is 6.49 times less risky than Eneos Holdings. The otc stock trades about -0.07 of its potential returns per unit of risk. The Eneos Holdings ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,047  in Eneos Holdings ADR on September 16, 2024 and sell it today you would lose (59.00) from holding Eneos Holdings ADR or give up 5.64% of portfolio value over 90 days.

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

Idemitsu Kosan CoLtd  vs.  Eneos Holdings ADR

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.

Eneos Holdings ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eneos Holdings ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Eneos Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Idemitsu Kosan and Eneos Holdings

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

The idea behind Idemitsu Kosan CoLtd and Eneos Holdings ADR 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.