Correlation Between Energy Transfer and Imperial Oil

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

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

Diversification Opportunities for Energy Transfer and Imperial Oil

-0.56

Correlation Coefficient

Energy Transfer  Imperial Oil

Excellent diversification

The 3 months correlation between Energy and Imperial is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil and Energy Transfer 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 Energy Transfer LP 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 Energy Transfer i.e., Energy Transfer and Imperial Oil go up and down completely randomly.

Pair Corralation between Energy Transfer and Imperial Oil

Allowing for the 90-day total investment horizon Energy Transfer LP is expected to generate 0.61 times more return on investment than Imperial Oil. However, Energy Transfer LP is 1.63 times less risky than Imperial Oil. It trades about 0.14 of its potential returns per unit of risk. Imperial Oil is currently generating about 0.05 per unit of risk. If you would invest  1,025  in Energy Transfer LP on October 5, 2024 and sell it today you would earn a total of  946.00  from holding Energy Transfer LP or generate 92.29% return on investment over 90 days.

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

Energy Transfer LP  vs.  Imperial Oil

Energy Transfer LP

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Energy Transfer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Imperial Oil

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Energy Transfer and Imperial Oil

The main advantage of trading using opposite Energy Transfer and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Transfer 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 Energy Transfer LP 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.