Correlation Between PetroShale and Inpex Corp

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

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

Diversification Opportunities for PetroShale and Inpex Corp

0.66

Correlation Coefficient

PetroShale  Inpex Corp

Poor diversification

The 3 months correlation between PetroShale and Inpex is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PetroShale and Inpex Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inpex Corp ADR and PetroShale 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 PetroShale are associated (or correlated) with Inpex Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inpex Corp ADR has no effect on the direction of PetroShale i.e., PetroShale and Inpex Corp go up and down completely randomly.

Pair Corralation between PetroShale and Inpex Corp

Assuming the 90 days horizon PetroShale is expected to under-perform the Inpex Corp. In addition to that, PetroShale is 1.4 times more volatile than Inpex Corp ADR. It trades about -0.2 of its total potential returns per unit of risk. Inpex Corp ADR is currently generating about -0.07 per unit of volatility. If you would invest  1,438  in Inpex Corp ADR on September 1, 2024 and sell it today you would lose (124.00) from holding Inpex Corp ADR or give up 8.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PetroShale  vs.  Inpex Corp ADR

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 fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Inpex Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PetroShale and Inpex Corp

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

The idea behind PetroShale and Inpex Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.