Correlation Between InPlay Oil and Rite Aid
Can any of the company-specific risk be diversified away by investing in both InPlay Oil and Rite Aid 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 InPlay Oil and Rite Aid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InPlay Oil Corp and Rite Aid, you can compare the effects of market volatilities on InPlay Oil and Rite Aid 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 InPlay Oil with a short position of Rite Aid. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and Rite Aid.
Diversification Opportunities for InPlay Oil and Rite Aid
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between InPlay and Rite is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Rite Aid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rite Aid and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with Rite Aid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rite Aid has no effect on the direction of InPlay Oil i.e., InPlay Oil and Rite Aid go up and down completely randomly.
Pair Corralation between InPlay Oil and Rite Aid
Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the Rite Aid. But the stock apears to be less risky and, when comparing its historical volatility, InPlay Oil Corp is 3.05 times less risky than Rite Aid. The stock trades about -0.02 of its potential returns per unit of risk. The Rite Aid is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Rite Aid on September 5, 2024 and sell it today you would earn a total of 2.00 from holding Rite Aid or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
InPlay Oil Corp vs. Rite Aid
Performance |
| Timeline |
| InPlay Oil Corp |
| Rite Aid |
InPlay Oil and Rite Aid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InPlay Oil and Rite Aid
The main advantage of trading using opposite InPlay Oil and Rite Aid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InPlay Oil position performs unexpectedly, Rite Aid 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 Rite Aid will offset losses from the drop in Rite Aid's long position.The idea behind InPlay Oil Corp and Rite Aid 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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