Correlation Between NYSE Composite and Inpex

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

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

Diversification Opportunities for NYSE Composite and Inpex

-0.07

Correlation Coefficient

NYSE Composite  Inpex

Good diversification

The 3 months correlation between NYSE and Inpex is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Inpex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inpex and NYSE Composite 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 NYSE Composite are associated (or correlated) with Inpex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inpex has no effect on the direction of NYSE Composite i.e., NYSE Composite and Inpex go up and down completely randomly.

Pair Corralation between NYSE Composite and Inpex

Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.35 times less return on investment than Inpex. But when comparing it to its historical volatility, NYSE Composite is 4.75 times less risky than Inpex. It trades about 0.06 of its potential returns per unit of risk. Inpex is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  940.00  in Inpex on October 2, 2024 and sell it today you would earn a total of  159.00  from holding Inpex or generate 16.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.86%
Values	Daily Returns

NYSE Composite  vs.  Inpex

Pair Trading with NYSE Composite and Inpex

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

The idea behind NYSE Composite and Inpex 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.