Correlation Between Hibiscus Petroleum and Impiana Hotels

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

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

Diversification Opportunities for Hibiscus Petroleum and Impiana Hotels

-0.21

Correlation Coefficient

Hibiscus Petroleum  Impiana Hotels

Very good diversification

The 3 months correlation between Hibiscus and Impiana is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hibiscus Petroleum BHD and Impiana Hotels Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impiana Hotels Bhd and Hibiscus 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 Hibiscus Petroleum BHD are associated (or correlated) with Impiana Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impiana Hotels Bhd has no effect on the direction of Hibiscus Petroleum i.e., Hibiscus Petroleum and Impiana Hotels go up and down completely randomly.

Pair Corralation between Hibiscus Petroleum and Impiana Hotels

Assuming the 90 days trading horizon Hibiscus Petroleum BHD is expected to under-perform the Impiana Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Hibiscus Petroleum BHD is 1.87 times less risky than Impiana Hotels. The stock trades about -0.02 of its potential returns per unit of risk. The Impiana Hotels Bhd is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Impiana Hotels Bhd on October 25, 2024 and sell it today you would earn a total of  2.00  from holding Impiana Hotels Bhd or generate 9.52% return on investment over 90 days.

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

Hibiscus Petroleum BHD  vs.  Impiana Hotels Bhd

Hibiscus Petroleum BHD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hibiscus Petroleum BHD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Hibiscus Petroleum is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Impiana Hotels Bhd

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Impiana Hotels Bhd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Impiana Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hibiscus Petroleum and Impiana Hotels

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

The idea behind Hibiscus Petroleum BHD and Impiana Hotels Bhd 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.