Correlation Between Dynagas LNG and Imperial Petroleum

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

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

Diversification Opportunities for Dynagas LNG and Imperial Petroleum

-0.8

Correlation Coefficient

Dynagas LNG  Imperial Petroleum

Pay attention - limited upside

The 3 months correlation between Dynagas and Imperial is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and Imperial Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Petroleum and Dynagas LNG 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 Dynagas LNG Partners 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 Dynagas LNG i.e., Dynagas LNG and Imperial Petroleum go up and down completely randomly.

Pair Corralation between Dynagas LNG and Imperial Petroleum

Given the investment horizon of 90 days Dynagas LNG Partners is expected to generate 1.44 times more return on investment than Imperial Petroleum. However, Dynagas LNG is 1.44 times more volatile than Imperial Petroleum. It trades about 0.21 of its potential returns per unit of risk. Imperial Petroleum is currently generating about -0.15 per unit of risk. If you would invest  391.00  in Dynagas LNG Partners on October 5, 2024 and sell it today you would earn a total of  157.00  from holding Dynagas LNG Partners or generate 40.15% return on investment over 90 days.

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

Dynagas LNG Partners  vs.  Imperial Petroleum

Dynagas LNG Partners

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dynagas LNG reported solid returns over the last few months and may actually be approaching a breakup point.

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 February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Dynagas LNG and Imperial Petroleum

The main advantage of trading using opposite Dynagas LNG and Imperial Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynagas LNG 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 Dynagas LNG Partners 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.