Correlation Between Japan Petroleum and Valeura Energy

Can any of the company-specific risk be diversified away by investing in both Japan Petroleum and Valeura 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 Japan Petroleum and Valeura Energy 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 Valeura Energy, you can compare the effects of market volatilities on Japan Petroleum and Valeura 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 Japan Petroleum with a short position of Valeura Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Petroleum and Valeura Energy.

Diversification Opportunities for Japan Petroleum and Valeura Energy

0.54

Correlation Coefficient

Japan Petroleum  Valeura Energy

Very weak diversification

The 3 months correlation between Japan and Valeura is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Japan Petroleum Exploration and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura Energy 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Japan Petroleum i.e., Japan Petroleum and Valeura Energy go up and down completely randomly.

Pair Corralation between Japan Petroleum and Valeura Energy

If you would invest  331.00  in Valeura Energy on September 17, 2024 and sell it today you would earn a total of  134.00  from holding Valeura Energy or generate 40.48% return on investment over 90 days.

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

Japan Petroleum Exploration  vs.  Valeura Energy

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.

Valeura Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Petroleum and Valeura Energy

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

The idea behind Japan Petroleum Exploration and Valeura 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.