Correlation Between Cannonau Corp and Inpex Corp

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

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

Diversification Opportunities for Cannonau Corp and Inpex Corp

0.18

Correlation Coefficient

Cannonau Corp  Inpex Corp

Average diversification

The 3 months correlation between Cannonau and Inpex is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cannonau Corp 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 Cannonau Corp 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 Cannonau Corp 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 Cannonau Corp i.e., Cannonau Corp and Inpex Corp go up and down completely randomly.

Pair Corralation between Cannonau Corp and Inpex Corp

Given the investment horizon of 90 days Cannonau Corp is expected to generate 6.75 times more return on investment than Inpex Corp. However, Cannonau Corp is 6.75 times more volatile than Inpex Corp ADR. It trades about 0.06 of its potential returns per unit of risk. Inpex Corp ADR is currently generating about 0.14 per unit of risk. If you would invest  1.05  in Cannonau Corp on February 23, 2024 and sell it today you would earn a total of  0.05  from holding Cannonau Corp or generate 4.76% return on investment over 90 days.

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

Cannonau Corp  vs.  Inpex Corp ADR

Cannonau Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cannonau Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Cannonau Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Inpex Corp ADR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inpex Corp ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Inpex Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cannonau Corp and Inpex Corp

The main advantage of trading using opposite Cannonau Corp and Inpex Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cannonau Corp 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 Cannonau Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.