Correlation Between Prairie Provident and Inpex Corp

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

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

Diversification Opportunities for Prairie Provident and Inpex Corp

-0.19

Correlation Coefficient

Prairie Provident  Inpex Corp

Good diversification

The 3 months correlation between Prairie and Inpex is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Prairie Provident Resources 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 Prairie Provident 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 Prairie Provident Resources 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 Prairie Provident i.e., Prairie Provident and Inpex Corp go up and down completely randomly.

Pair Corralation between Prairie Provident and Inpex Corp

Assuming the 90 days horizon Prairie Provident Resources is expected to generate 22.64 times more return on investment than Inpex Corp. However, Prairie Provident is 22.64 times more volatile than Inpex Corp ADR. It trades about 0.14 of its potential returns per unit of risk. Inpex Corp ADR is currently generating about 0.09 per unit of risk. If you would invest  1.06  in Prairie Provident Resources on December 29, 2024 and sell it today you would earn a total of  1.46  from holding Prairie Provident Resources or generate 137.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Prairie Provident Resources  vs.  Inpex Corp ADR

Prairie Provident

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prairie Provident Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prairie Provident reported solid returns over the last few months and may actually be approaching a breakup point.

Inpex Corp ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inpex Corp ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Inpex Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Prairie Provident and Inpex Corp

The main advantage of trading using opposite Prairie Provident and Inpex Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prairie Provident 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 Prairie Provident Resources 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 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.