Correlation Between Ferguson Plc and Inpex

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

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

Diversification Opportunities for Ferguson Plc and Inpex

0.06

Correlation Coefficient

Ferguson Plc  Inpex

Significant diversification

The 3 months correlation between Ferguson and Inpex is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and Inpex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inpex and Ferguson Plc 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 Ferguson Plc are associated (or correlated) with Inpex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inpex has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and Inpex go up and down completely randomly.

Pair Corralation between Ferguson Plc and Inpex

Given the investment horizon of 90 days Ferguson Plc is expected to under-perform the Inpex. But the stock apears to be less risky and, when comparing its historical volatility, Ferguson Plc is 2.16 times less risky than Inpex. The stock trades about -0.34 of its potential returns per unit of risk. The Inpex is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,205  in Inpex on September 30, 2024 and sell it today you would lose (106.00) from holding Inpex or give up 8.8% of portfolio value over 90 days.

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

Ferguson Plc  vs.  Inpex

Ferguson Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferguson Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Inpex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inpex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ferguson Plc and Inpex

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

The idea behind Ferguson Plc and Inpex 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.