Correlation Between Imperial Res and Foothills Exploration

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

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

Diversification Opportunities for Imperial Res and Foothills Exploration

0.0

Correlation Coefficient

Imperial Res  Foothills Exploration

Pay attention - limited upside

The 3 months correlation between Imperial and Foothills is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Res and Foothills Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foothills Exploration and Imperial Res 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 Res are associated (or correlated) with Foothills Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foothills Exploration has no effect on the direction of Imperial Res i.e., Imperial Res and Foothills Exploration go up and down completely randomly.

Pair Corralation between Imperial Res and Foothills Exploration

Given the investment horizon of 90 days Imperial Res is expected to generate 1.56 times less return on investment than Foothills Exploration. In addition to that, Imperial Res is 1.62 times more volatile than Foothills Exploration. It trades about 0.05 of its total potential returns per unit of risk. Foothills Exploration is currently generating about 0.12 per unit of volatility. If you would invest  0.02  in Foothills Exploration on September 24, 2024 and sell it today you would lose (0.01) from holding Foothills Exploration or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Imperial Res  vs.  Foothills Exploration

Imperial Res

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Res are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Imperial Res exhibited solid returns over the last few months and may actually be approaching a breakup point.

Foothills Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foothills Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Foothills Exploration is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Imperial Res and Foothills Exploration

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

The idea behind Imperial Res and Foothills Exploration 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.