Correlation Between Imperial Petroleum and Kinetik Holdings

Can any of the company-specific risk be diversified away by investing in both Imperial Petroleum and Kinetik Holdings 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 Kinetik Holdings 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 Kinetik Holdings, you can compare the effects of market volatilities on Imperial Petroleum and Kinetik Holdings 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 Kinetik Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Petroleum and Kinetik Holdings.

Diversification Opportunities for Imperial Petroleum and Kinetik Holdings

0.77

Correlation Coefficient

Imperial Petroleum  Kinetik Holdings

Poor diversification

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

Pair Corralation between Imperial Petroleum and Kinetik Holdings

Assuming the 90 days horizon Imperial Petroleum is expected to generate 3.95 times less return on investment than Kinetik Holdings. But when comparing it to its historical volatility, Imperial Petroleum Preferred is 2.22 times less risky than Kinetik Holdings. It trades about 0.15 of its potential returns per unit of risk. Kinetik Holdings is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  4,273  in Kinetik Holdings on August 31, 2024 and sell it today you would earn a total of  1,593  from holding Kinetik Holdings or generate 37.28% 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.  Kinetik Holdings

Imperial Petroleum

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Petroleum Preferred are ranked lower than 11 (%) 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 December 2024.

Kinetik Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetik Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kinetik Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Imperial Petroleum and Kinetik Holdings

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

The idea behind Imperial Petroleum Preferred and Kinetik Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..