Correlation Between Japan Petroleum and WIMFARM SA

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

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

Diversification Opportunities for Japan Petroleum and WIMFARM SA

0.27

Correlation Coefficient

Japan Petroleum  WIMFARM SA

Modest diversification

The 3 months correlation between Japan and WIMFARM is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Japan Petroleum Exploration and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO and Japan Petroleum 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 Japan Petroleum Exploration are associated (or correlated) with WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of Japan Petroleum i.e., Japan Petroleum and WIMFARM SA go up and down completely randomly.

Pair Corralation between Japan Petroleum and WIMFARM SA

Assuming the 90 days horizon Japan Petroleum Exploration is expected to generate 0.24 times more return on investment than WIMFARM SA. However, Japan Petroleum Exploration is 4.22 times less risky than WIMFARM SA. It trades about 0.21 of its potential returns per unit of risk. WIMFARM SA EO is currently generating about -0.03 per unit of risk. If you would invest  685.00  in Japan Petroleum Exploration on October 8, 2024 and sell it today you would earn a total of  30.00  from holding Japan Petroleum Exploration or generate 4.38% return on investment over 90 days.

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

Japan Petroleum Exploration  vs.  WIMFARM SA EO

Japan Petroleum Expl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Petroleum Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WIMFARM SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIMFARM SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WIMFARM SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Japan Petroleum and WIMFARM SA

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

The idea behind Japan Petroleum Exploration and WIMFARM SA EO 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.