Correlation Between InPlay Oil and CapitaLand Investment

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

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

Diversification Opportunities for InPlay Oil and CapitaLand Investment

0.57

Correlation Coefficient

InPlay Oil  CapitaLand Investment

Very weak diversification

The 3 months correlation between InPlay and CapitaLand is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of InPlay Oil i.e., InPlay Oil and CapitaLand Investment go up and down completely randomly.

Pair Corralation between InPlay Oil and CapitaLand Investment

Assuming the 90 days trading horizon InPlay Oil Corp is expected to generate 1.34 times more return on investment than CapitaLand Investment. However, InPlay Oil is 1.34 times more volatile than CapitaLand Investment Limited. It trades about -0.01 of its potential returns per unit of risk. CapitaLand Investment Limited is currently generating about -0.03 per unit of risk. If you would invest  144.00  in InPlay Oil Corp on October 25, 2024 and sell it today you would lose (32.00) from holding InPlay Oil Corp or give up 22.22% of portfolio value over 90 days.

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

InPlay Oil Corp  vs.  CapitaLand Investment Limited

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

CapitaLand Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CapitaLand Investment Limited 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 basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with InPlay Oil and CapitaLand Investment

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

The idea behind InPlay Oil Corp and CapitaLand Investment Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.