Correlation Between InPlay Oil and Homerun Resources

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

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

Diversification Opportunities for InPlay Oil and Homerun Resources

-0.29

Correlation Coefficient

InPlay Oil  Homerun Resources

Very good diversification

The 3 months correlation between InPlay and Homerun is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Homerun Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homerun Resources and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with Homerun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homerun Resources has no effect on the direction of InPlay Oil i.e., InPlay Oil and Homerun Resources go up and down completely randomly.

Pair Corralation between InPlay Oil and Homerun Resources

Assuming the 90 days trading horizon InPlay Oil Corp is expected to generate 0.47 times more return on investment than Homerun Resources. However, InPlay Oil Corp is 2.15 times less risky than Homerun Resources. It trades about 0.05 of its potential returns per unit of risk. Homerun Resources is currently generating about -0.17 per unit of risk. If you would invest  171.00  in InPlay Oil Corp on October 11, 2024 and sell it today you would earn a total of  6.00  from holding InPlay Oil Corp or generate 3.51% return on investment over 90 days.

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

InPlay Oil Corp  vs.  Homerun Resources

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Homerun Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homerun Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Homerun Resources is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with InPlay Oil and Homerun Resources

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

The idea behind InPlay Oil Corp and Homerun Resources 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.