Correlation Between Teijin and World Oil

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

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

Diversification Opportunities for Teijin and World Oil

0.35

Correlation Coefficient

Teijin  World Oil

Weak diversification

The 3 months correlation between Teijin and World is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Teijin and World Oil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Oil Group and Teijin 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 Teijin are associated (or correlated) with World Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Oil Group has no effect on the direction of Teijin i.e., Teijin and World Oil go up and down completely randomly.

Pair Corralation between Teijin and World Oil

Assuming the 90 days horizon Teijin is expected to under-perform the World Oil. But the pink sheet apears to be less risky and, when comparing its historical volatility, Teijin is 3.86 times less risky than World Oil. The pink sheet trades about -0.08 of its potential returns per unit of risk. The World Oil Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.31  in World Oil Group on September 3, 2024 and sell it today you would earn a total of  0.51  from holding World Oil Group or generate 38.93% return on investment over 90 days.

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

Teijin  vs.  World Oil Group

Teijin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teijin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

World Oil Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in World Oil Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, World Oil demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teijin and World Oil

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

The idea behind Teijin and World Oil Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.