Correlation Between Idemitsu Kosan and Delek Energy

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

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

Diversification Opportunities for Idemitsu Kosan and Delek Energy

0.06

Correlation Coefficient

Idemitsu Kosan  Delek Energy

Significant diversification

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

Pair Corralation between Idemitsu Kosan and Delek Energy

Assuming the 90 days horizon Idemitsu Kosan is expected to generate 12.48 times less return on investment than Delek Energy. In addition to that, Idemitsu Kosan is 1.28 times more volatile than Delek Energy. It trades about 0.0 of its total potential returns per unit of risk. Delek Energy is currently generating about 0.06 per unit of volatility. If you would invest  1,689  in Delek Energy on October 26, 2024 and sell it today you would earn a total of  124.00  from holding Delek Energy or generate 7.34% return on investment over 90 days.

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

Idemitsu Kosan Co  vs.  Delek Energy

Idemitsu Kosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Idemitsu Kosan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Idemitsu Kosan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Delek Energy

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Delek Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Idemitsu Kosan and Delek Energy

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

The idea behind Idemitsu Kosan Co and Delek 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.