Correlation Between InPlay Oil and Industrial

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

Diversification Opportunities for InPlay Oil and Industrial

-0.27

Correlation Coefficient

InPlay Oil  Industrial

Very good diversification

The 3 months correlation between InPlay and Industrial is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of InPlay Oil i.e., InPlay Oil and Industrial go up and down completely randomly.

Pair Corralation between InPlay Oil and Industrial

Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the Industrial. But the stock apears to be less risky and, when comparing its historical volatility, InPlay Oil Corp is 1.43 times less risky than Industrial. The stock trades about -0.04 of its potential returns per unit of risk. The Industrial and Commercial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  51.00  in Industrial and Commercial on October 4, 2024 and sell it today you would lose (3.00) from holding Industrial and Commercial or give up 5.88% of portfolio value over 90 days.

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

InPlay Oil Corp  vs.  Industrial and Commercial

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Industrial and Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrial and Commercial 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 Industrial

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

The idea behind InPlay Oil Corp and Industrial and Commercial 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.