Correlation Between Idemitsu Kosan and PBF Energy

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

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

Diversification Opportunities for Idemitsu Kosan and PBF Energy

-0.47

Correlation Coefficient

Idemitsu Kosan  PBF Energy

Very good diversification

The 3 months correlation between Idemitsu and PBF is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Idemitsu Kosan CoLtd and PBF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBF Energy and Idemitsu Kosan 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 Idemitsu Kosan CoLtd are associated (or correlated) with PBF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBF Energy has no effect on the direction of Idemitsu Kosan i.e., Idemitsu Kosan and PBF Energy go up and down completely randomly.

Pair Corralation between Idemitsu Kosan and PBF Energy

Assuming the 90 days horizon Idemitsu Kosan CoLtd is expected to under-perform the PBF Energy. But the otc stock apears to be less risky and, when comparing its historical volatility, Idemitsu Kosan CoLtd is 5.27 times less risky than PBF Energy. The otc stock trades about -0.05 of its potential returns per unit of risk. The PBF Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,131  in PBF Energy on October 26, 2024 and sell it today you would lose (86.00) from holding PBF Energy or give up 2.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Idemitsu Kosan CoLtd  vs.  PBF Energy

Idemitsu Kosan CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Idemitsu Kosan CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Idemitsu Kosan is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PBF Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PBF Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, PBF Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Idemitsu Kosan and PBF Energy

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

The idea behind Idemitsu Kosan CoLtd and PBF Energy 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.