Correlation Between Inpex and Woodside Petroleum

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

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

Diversification Opportunities for Inpex and Woodside Petroleum

0.49

Correlation Coefficient

Inpex  Woodside Petroleum

Very weak diversification

The 3 months correlation between Inpex and Woodside is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Inpex and Woodside Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Petroleum and Inpex 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 Inpex are associated (or correlated) with Woodside Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Petroleum has no effect on the direction of Inpex i.e., Inpex and Woodside Petroleum go up and down completely randomly.

Pair Corralation between Inpex and Woodside Petroleum

Assuming the 90 days horizon Inpex is expected to generate 1.07 times more return on investment than Woodside Petroleum. However, Inpex is 1.07 times more volatile than Woodside Petroleum. It trades about -0.04 of its potential returns per unit of risk. Woodside Petroleum is currently generating about -0.16 per unit of risk. If you would invest  1,205  in Inpex on September 29, 2024 and sell it today you would lose (106.00) from holding Inpex or give up 8.8% of portfolio value over 90 days.

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

Inpex  vs.  Woodside Petroleum

Inpex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inpex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Woodside Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woodside Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Inpex and Woodside Petroleum

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

The idea behind Inpex and Woodside Petroleum 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.