Correlation Between Yangarra Resources and InPlay Oil

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

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

Diversification Opportunities for Yangarra Resources and InPlay Oil

0.75

Correlation Coefficient

Yangarra Resources  InPlay Oil

Poor diversification

The 3 months correlation between Yangarra and InPlay is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Yangarra Resources and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp and Yangarra Resources 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 Yangarra Resources are associated (or correlated) with InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Yangarra Resources i.e., Yangarra Resources and InPlay Oil go up and down completely randomly.

Pair Corralation between Yangarra Resources and InPlay Oil

Assuming the 90 days trading horizon Yangarra Resources is expected to generate 1.19 times more return on investment than InPlay Oil. However, Yangarra Resources is 1.19 times more volatile than InPlay Oil Corp. It trades about 0.01 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.1 per unit of risk. If you would invest  102.00  in Yangarra Resources on September 1, 2024 and sell it today you would earn a total of  0.00  from holding Yangarra Resources or generate 0.0% return on investment over 90 days.

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

Yangarra Resources  vs.  InPlay Oil Corp

Yangarra Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yangarra Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Yangarra Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Yangarra Resources and InPlay Oil

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

The idea behind Yangarra Resources and InPlay Oil Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.