Correlation Between CBL International and Imperial Petroleum

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

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

Diversification Opportunities for CBL International and Imperial Petroleum

-0.18

Correlation Coefficient

CBL International  Imperial Petroleum

Good diversification

The 3 months correlation between CBL and Imperial is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding CBL International Limited and Imperial Petroleum Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Petroleum and CBL 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 CBL International Limited 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 CBL International i.e., CBL International and Imperial Petroleum go up and down completely randomly.

Pair Corralation between CBL International and Imperial Petroleum

Given the investment horizon of 90 days CBL International Limited is expected to generate 7.11 times more return on investment than Imperial Petroleum. However, CBL International is 7.11 times more volatile than Imperial Petroleum Preferred. It trades about 0.01 of its potential returns per unit of risk. Imperial Petroleum Preferred is currently generating about 0.08 per unit of risk. If you would invest  442.00  in CBL International Limited on October 5, 2024 and sell it today you would lose (336.00) from holding CBL International Limited or give up 76.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.9%
Values	Daily Returns

CBL International Limited  vs.  Imperial Petroleum Preferred

CBL International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CBL International Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, CBL International disclosed solid returns over the last few months and may actually be approaching a breakup point.

Imperial Petroleum

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Petroleum Preferred are ranked lower than 3 (%) 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.

Pair Trading with CBL International and Imperial Petroleum

The main advantage of trading using opposite CBL International and Imperial Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CBL International 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 CBL International Limited and Imperial Petroleum Preferred 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.