Correlation Between Freehold Royalties and Inpex Corp

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

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

Diversification Opportunities for Freehold Royalties and Inpex Corp

0.06

Correlation Coefficient

Freehold Royalties  Inpex Corp

Significant diversification

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

Pair Corralation between Freehold Royalties and Inpex Corp

Assuming the 90 days horizon Freehold Royalties is expected to generate 4.51 times less return on investment than Inpex Corp. But when comparing it to its historical volatility, Freehold Royalties is 1.28 times less risky than Inpex Corp. It trades about 0.03 of its potential returns per unit of risk. Inpex Corp ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,275  in Inpex Corp ADR on December 29, 2024 and sell it today you would earn a total of  114.00  from holding Inpex Corp ADR or generate 8.94% return on investment over 90 days.

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

Freehold Royalties  vs.  Inpex Corp ADR

Freehold Royalties

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Freehold Royalties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Inpex Corp ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inpex Corp ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Inpex Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Freehold Royalties and Inpex Corp

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

The idea behind Freehold Royalties and Inpex Corp ADR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..