Correlation Between InPlay Oil and Hexcel

Can any of the company-specific risk be diversified away by investing in both InPlay Oil and Hexcel 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 Hexcel 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 Hexcel, you can compare the effects of market volatilities on InPlay Oil and Hexcel 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 Hexcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and Hexcel.

Diversification Opportunities for InPlay Oil and Hexcel

-0.3

Correlation Coefficient

InPlay Oil  Hexcel

Very good diversification

The 3 months correlation between InPlay and Hexcel is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Hexcel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel 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 Hexcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel has no effect on the direction of InPlay Oil i.e., InPlay Oil and Hexcel go up and down completely randomly.

Pair Corralation between InPlay Oil and Hexcel

Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the Hexcel. In addition to that, InPlay Oil is 1.55 times more volatile than Hexcel. It trades about -0.04 of its total potential returns per unit of risk. Hexcel is currently generating about 0.14 per unit of volatility. If you would invest  5,734  in Hexcel on October 24, 2024 and sell it today you would earn a total of  766.00  from holding Hexcel or generate 13.36% return on investment over 90 days.

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

InPlay Oil Corp  vs.  Hexcel

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.

Hexcel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hexcel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hexcel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InPlay Oil and Hexcel

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

The idea behind InPlay Oil Corp and Hexcel 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..