Correlation Between Teekay and Imperial Petroleum

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

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

Diversification Opportunities for Teekay and Imperial Petroleum

0.89

Correlation Coefficient

Teekay  Imperial Petroleum

Very poor diversification

The 3 months correlation between Teekay and Imperial is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Teekay and Imperial Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Petroleum and Teekay 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 Teekay are associated (or correlated) with Imperial Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Petroleum has no effect on the direction of Teekay i.e., Teekay and Imperial Petroleum go up and down completely randomly.

Pair Corralation between Teekay and Imperial Petroleum

Allowing for the 90-day total investment horizon Teekay is expected to generate 1.6 times more return on investment than Imperial Petroleum. However, Teekay is 1.6 times more volatile than Imperial Petroleum. It trades about -0.08 of its potential returns per unit of risk. Imperial Petroleum is currently generating about -0.33 per unit of risk. If you would invest  789.00  in Teekay on September 25, 2024 and sell it today you would lose (110.00) from holding Teekay or give up 13.94% of portfolio value over 90 days.

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

Teekay  vs.  Imperial Petroleum

Teekay

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teekay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Imperial Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Teekay and Imperial Petroleum

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

The idea behind Teekay and Imperial Petroleum 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.