Correlation Between Whiting Petroleum and Inpex Corp

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

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

Diversification Opportunities for Whiting Petroleum and Inpex Corp

0.42

Correlation Coefficient

Whiting Petroleum  Inpex Corp

Very weak diversification

The 3 months correlation between Whiting and Inpex is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Whiting Petroleum 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 Whiting Petroleum 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 Whiting Petroleum 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 Whiting Petroleum i.e., Whiting Petroleum and Inpex Corp go up and down completely randomly.

Pair Corralation between Whiting Petroleum and Inpex Corp

Assuming the 90 days horizon Whiting Petroleum is expected to generate 8.83 times more return on investment than Inpex Corp. However, Whiting Petroleum is 8.83 times more volatile than Inpex Corp ADR. It trades about 0.0 of its potential returns per unit of risk. Inpex Corp ADR is currently generating about -0.04 per unit of risk. If you would invest  550.00  in Whiting Petroleum on November 28, 2024 and sell it today you would lose (246.00) from holding Whiting Petroleum or give up 44.73% of portfolio value over 90 days.

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

Whiting Petroleum  vs.  Inpex Corp ADR

Whiting Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, Whiting Petroleum is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Inpex Corp ADR

Risk-Adjusted Performance

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 Whiting Petroleum and Inpex Corp

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

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.