Correlation Between MV Oil and Inpex Corp

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

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

Diversification Opportunities for MV Oil and Inpex Corp

0.41

Correlation Coefficient

MV Oil  Inpex Corp

Very weak diversification

The 3 months correlation between MVO and Inpex is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding MV Oil Trust and Inpex Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inpex Corp ADR and MV 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 MV Oil Trust are associated (or correlated) with Inpex Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inpex Corp ADR has no effect on the direction of MV Oil i.e., MV Oil and Inpex Corp go up and down completely randomly.

Pair Corralation between MV Oil and Inpex Corp

Considering the 90-day investment horizon MV Oil Trust is expected to under-perform the Inpex Corp. But the stock apears to be less risky and, when comparing its historical volatility, MV Oil Trust is 1.04 times less risky than Inpex Corp. The stock trades about -0.08 of its potential returns per unit of risk. The Inpex Corp ADR is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,335  in Inpex Corp ADR on September 4, 2024 and sell it today you would earn a total of  2.00  from holding Inpex Corp ADR or generate 0.15% return on investment over 90 days.

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

MV Oil Trust  vs.  Inpex Corp ADR

MV Oil Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MV Oil Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, MV Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with MV Oil and Inpex Corp

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

The idea behind MV Oil Trust and Inpex Corp ADR 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.