Correlation Between Inpex Corp and Canacol Energy

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

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

Diversification Opportunities for Inpex Corp and Canacol Energy

0.46

Correlation Coefficient

Inpex Corp  Canacol Energy

Very weak diversification

The 3 months correlation between Inpex and Canacol is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Inpex Corp ADR and Canacol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canacol Energy and Inpex Corp 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 Corp ADR are associated (or correlated) with Canacol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canacol Energy has no effect on the direction of Inpex Corp i.e., Inpex Corp and Canacol Energy go up and down completely randomly.

Pair Corralation between Inpex Corp and Canacol Energy

Assuming the 90 days horizon Inpex Corp ADR is expected to under-perform the Canacol Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Inpex Corp ADR is 1.9 times less risky than Canacol Energy. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Canacol Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  265.00  in Canacol Energy on September 4, 2024 and sell it today you would earn a total of  6.00  from holding Canacol Energy or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Inpex Corp ADR  vs.  Canacol Energy

Inpex Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Canacol Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canacol Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canacol Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Inpex Corp and Canacol Energy

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

The idea behind Inpex Corp ADR and Canacol 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.