Correlation Between Coastal Caribbean and Imperial Res

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

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

Diversification Opportunities for Coastal Caribbean and Imperial Res

0.12

Correlation Coefficient

Coastal Caribbean  Imperial Res

Average diversification

The 3 months correlation between Coastal and Imperial is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Caribbean Oils and Imperial Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Res and Coastal Caribbean 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 Coastal Caribbean Oils are associated (or correlated) with Imperial Res. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Res has no effect on the direction of Coastal Caribbean i.e., Coastal Caribbean and Imperial Res go up and down completely randomly.

Pair Corralation between Coastal Caribbean and Imperial Res

If you would invest  0.03  in Imperial Res on September 3, 2024 and sell it today you would lose (0.01) from holding Imperial Res or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.54%
Values	Daily Returns

Coastal Caribbean Oils  vs.  Imperial Res

Coastal Caribbean Oils

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coastal Caribbean Oils has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Coastal Caribbean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Imperial Res

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Coastal Caribbean and Imperial Res

The main advantage of trading using opposite Coastal Caribbean and Imperial Res positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coastal Caribbean position performs unexpectedly, Imperial Res 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 Imperial Res will offset losses from the drop in Imperial Res' long position.

The idea behind Coastal Caribbean Oils and Imperial Res 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.