Correlation Between Imperial Petroleum and Marine Petroleum

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

Diversification Opportunities for Imperial Petroleum and Marine Petroleum

-0.55

Correlation Coefficient

Imperial Petroleum  Marine Petroleum

Excellent diversification

The 3 months correlation between Imperial and Marine is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Petroleum Preferred and Marine Petroleum Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Petroleum Trust 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 Marine Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Petroleum Trust has no effect on the direction of Imperial Petroleum i.e., Imperial Petroleum and Marine Petroleum go up and down completely randomly.

Pair Corralation between Imperial Petroleum and Marine Petroleum

Assuming the 90 days horizon Imperial Petroleum Preferred is expected to generate 0.5 times more return on investment than Marine Petroleum. However, Imperial Petroleum Preferred is 2.0 times less risky than Marine Petroleum. It trades about 0.16 of its potential returns per unit of risk. Marine Petroleum Trust is currently generating about -0.19 per unit of risk. If you would invest  2,530  in Imperial Petroleum Preferred on September 24, 2024 and sell it today you would earn a total of  40.00  from holding Imperial Petroleum Preferred or generate 1.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Imperial Petroleum Preferred  vs.  Marine Petroleum Trust

Imperial Petroleum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Petroleum Preferred are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Imperial Petroleum is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Marine Petroleum Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Petroleum Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Marine Petroleum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Imperial Petroleum and Marine Petroleum

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

The idea behind Imperial Petroleum Preferred and Marine Petroleum Trust 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.