Correlation Between Aquagold International and Imperial Oil

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

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

Diversification Opportunities for Aquagold International and Imperial Oil

0.54

Correlation Coefficient

Aquagold International  Imperial Oil

Very weak diversification

The 3 months correlation between Aquagold and Imperial is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil and Aquagold International 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 Aquagold International are associated (or correlated) with Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of Aquagold International i.e., Aquagold International and Imperial Oil go up and down completely randomly.

Pair Corralation between Aquagold International and Imperial Oil

Given the investment horizon of 90 days Aquagold International is expected to under-perform the Imperial Oil. In addition to that, Aquagold International is 6.61 times more volatile than Imperial Oil. It trades about -0.17 of its total potential returns per unit of risk. Imperial Oil is currently generating about -0.07 per unit of volatility. If you would invest  7,282  in Imperial Oil on December 3, 2024 and sell it today you would lose (659.00) from holding Imperial Oil or give up 9.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Aquagold International  vs.  Imperial Oil

Aquagold International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aquagold International 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Imperial Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Imperial Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Aquagold International and Imperial Oil

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

The idea behind Aquagold International and Imperial Oil 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.