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 Co 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

0.52

Correlation Coefficient

Idemitsu Kosan  PBF Energy

Very weak diversification

The 3 months correlation between Idemitsu and PBF is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Idemitsu Kosan Co 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 Co 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 Co is expected to generate 1.51 times more return on investment than PBF Energy. However, Idemitsu Kosan is 1.51 times more volatile than PBF Energy. It trades about -0.02 of its potential returns per unit of risk. PBF Energy is currently generating about -0.12 per unit of risk. If you would invest  1,435  in Idemitsu Kosan Co on October 11, 2024 and sell it today you would lose (105.00) from holding Idemitsu Kosan Co or give up 7.32% of portfolio value over 90 days.

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

Idemitsu Kosan Co  vs.  PBF 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.

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 conflicting performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company 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 Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.