Correlation Between Woodside Petroleum and Inpex

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

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

Diversification Opportunities for Woodside Petroleum and Inpex

0.49

Correlation Coefficient

Woodside Petroleum  Inpex

Very weak diversification

The 3 months correlation between Woodside and Inpex is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Woodside Petroleum and Inpex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inpex and Woodside 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 Woodside Petroleum 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 Woodside Petroleum i.e., Woodside Petroleum and Inpex go up and down completely randomly.

Pair Corralation between Woodside Petroleum and Inpex

Assuming the 90 days horizon Woodside Petroleum is expected to under-perform the Inpex. But the pink sheet apears to be less risky and, when comparing its historical volatility, Woodside Petroleum is 1.07 times less risky than Inpex. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Inpex is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,205  in Inpex on September 29, 2024 and sell it today you would lose (106.00) from holding Inpex or give up 8.8% of portfolio value over 90 days.

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

Woodside Petroleum  vs.  Inpex

Woodside Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Woodside Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Inpex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inpex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Woodside Petroleum and Inpex

The main advantage of trading using opposite Woodside Petroleum and Inpex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Woodside Petroleum 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 Woodside Petroleum 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.