Correlation Between Japan Petroleum and PetroShale

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

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

Diversification Opportunities for Japan Petroleum and PetroShale

-0.17

Correlation Coefficient

Japan Petroleum  PetroShale

Good diversification

The 3 months correlation between Japan and PetroShale is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Japan Petroleum Exploration and PetroShale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroShale and Japan 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 Japan Petroleum Exploration are associated (or correlated) with PetroShale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroShale has no effect on the direction of Japan Petroleum i.e., Japan Petroleum and PetroShale go up and down completely randomly.

Pair Corralation between Japan Petroleum and PetroShale

If you would invest  3,044  in Japan Petroleum Exploration on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Japan Petroleum Exploration or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Japan Petroleum Exploration  vs.  PetroShale

Japan Petroleum Expl

Risk-Adjusted Performance

0 of 100

Very Weak

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

PetroShale

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroShale has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Japan Petroleum and PetroShale

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

The idea behind Japan Petroleum Exploration and PetroShale 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.