Correlation Between RETAIL FOOD and Japan Petroleum

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

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

Diversification Opportunities for RETAIL FOOD and Japan Petroleum

-0.45

Correlation Coefficient

RETAIL FOOD  Japan Petroleum

Very good diversification

The 3 months correlation between RETAIL and Japan is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and Japan Petroleum Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Petroleum Expl and RETAIL FOOD 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 RETAIL FOOD GROUP are associated (or correlated) with Japan Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Petroleum Expl has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and Japan Petroleum go up and down completely randomly.

Pair Corralation between RETAIL FOOD and Japan Petroleum

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to under-perform the Japan Petroleum. In addition to that, RETAIL FOOD is 1.71 times more volatile than Japan Petroleum Exploration. It trades about -0.06 of its total potential returns per unit of risk. Japan Petroleum Exploration is currently generating about -0.01 per unit of volatility. If you would invest  725.00  in Japan Petroleum Exploration on October 10, 2024 and sell it today you would lose (10.00) from holding Japan Petroleum Exploration or give up 1.38% of portfolio value over 90 days.

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

RETAIL FOOD GROUP  vs.  Japan Petroleum Exploration

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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.

Pair Trading with RETAIL FOOD and Japan Petroleum

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

The idea behind RETAIL FOOD GROUP and Japan Petroleum Exploration 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.