Correlation Between Imperial Petroleum and EnLink Midstream

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

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

Diversification Opportunities for Imperial Petroleum and EnLink Midstream

0.77

Correlation Coefficient

Imperial Petroleum  EnLink Midstream

Poor diversification

The 3 months correlation between Imperial and EnLink is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Petroleum Preferred and EnLink Midstream LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnLink Midstream LLC and Imperial 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 Imperial Petroleum Preferred are associated (or correlated) with EnLink Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnLink Midstream LLC has no effect on the direction of Imperial Petroleum i.e., Imperial Petroleum and EnLink Midstream go up and down completely randomly.

Pair Corralation between Imperial Petroleum and EnLink Midstream

Assuming the 90 days horizon Imperial Petroleum is expected to generate 1.76 times less return on investment than EnLink Midstream. In addition to that, Imperial Petroleum is 1.04 times more volatile than EnLink Midstream LLC. It trades about 0.13 of its total potential returns per unit of risk. EnLink Midstream LLC is currently generating about 0.24 per unit of volatility. If you would invest  1,405  in EnLink Midstream LLC on September 2, 2024 and sell it today you would earn a total of  196.00  from holding EnLink Midstream LLC or generate 13.95% return on investment over 90 days.

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

Imperial Petroleum Preferred  vs.  EnLink Midstream LLC

Imperial Petroleum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Petroleum Preferred are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Imperial Petroleum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EnLink Midstream LLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EnLink Midstream LLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, EnLink Midstream exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Imperial Petroleum and EnLink Midstream

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

The idea behind Imperial Petroleum Preferred and EnLink Midstream LLC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.