Correlation Between GAMING FAC and Japan Petroleum

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

By analyzing existing cross correlation between GAMING FAC SA and Japan Petroleum Exploration, you can compare the effects of market volatilities on GAMING FAC and Japan Petroleum 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 GAMING FAC with a short position of Japan Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMING FAC and Japan Petroleum.

Diversification Opportunities for GAMING FAC and Japan Petroleum

0.2

Correlation Coefficient

GAMING FAC  Japan Petroleum

Modest diversification

The 3 months correlation between GAMING and Japan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding GAMING FAC SA and Japan Petroleum Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Petroleum Expl and GAMING FAC 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 GAMING FAC SA are associated (or correlated) with Japan Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Petroleum Expl has no effect on the direction of GAMING FAC i.e., GAMING FAC and Japan Petroleum go up and down completely randomly.

Pair Corralation between GAMING FAC and Japan Petroleum

Assuming the 90 days horizon GAMING FAC SA is expected to generate 3.09 times more return on investment than Japan Petroleum. However, GAMING FAC is 3.09 times more volatile than Japan Petroleum Exploration. It trades about 0.1 of its potential returns per unit of risk. Japan Petroleum Exploration is currently generating about 0.16 per unit of risk. If you would invest  155.00  in GAMING FAC SA on December 21, 2024 and sell it today you would earn a total of  34.00  from holding GAMING FAC SA or generate 21.94% return on investment over 90 days.

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

GAMING FAC SA  vs.  Japan Petroleum Exploration

GAMING FAC SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GAMING FAC SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GAMING FAC reported solid returns over the last few months and may actually be approaching a breakup point.

Japan Petroleum Expl

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Petroleum Exploration are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Petroleum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GAMING FAC and Japan Petroleum

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

The idea behind GAMING FAC SA and Japan Petroleum Exploration 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.