Correlation Between Valeura Energy and Inpex Corp

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

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

Diversification Opportunities for Valeura Energy and Inpex Corp

0.26

Correlation Coefficient

Valeura Energy  Inpex Corp

Modest diversification

The 3 months correlation between Valeura and Inpex is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Valeura Energy 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 Valeura Energy 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 Valeura Energy 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 Valeura Energy i.e., Valeura Energy and Inpex Corp go up and down completely randomly.

Pair Corralation between Valeura Energy and Inpex Corp

Assuming the 90 days horizon Valeura Energy is expected to generate 1.88 times more return on investment than Inpex Corp. However, Valeura Energy is 1.88 times more volatile than Inpex Corp ADR. It trades about 0.13 of its potential returns per unit of risk. Inpex Corp ADR is currently generating about 0.11 per unit of risk. If you would invest  476.00  in Valeura Energy on December 28, 2024 and sell it today you would earn a total of  114.00  from holding Valeura Energy or generate 23.95% return on investment over 90 days.

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

Valeura Energy  vs.  Inpex Corp ADR

Valeura Energy

Risk-Adjusted Performance

OK

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

Inpex Corp ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inpex Corp ADR are ranked lower than 8 (%) 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 Valeura Energy and Inpex Corp

The main advantage of trading using opposite Valeura Energy and Inpex Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valeura Energy 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 Valeura Energy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.