Correlation Between Imperial Brands and Clean Power

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

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

Diversification Opportunities for Imperial Brands and Clean Power

-0.55

Correlation Coefficient

Imperial Brands  Clean Power

Excellent diversification

The 3 months correlation between Imperial and Clean is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and Clean Power Hydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Power Hydrogen and Imperial Brands 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 Imperial Brands PLC are associated (or correlated) with Clean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Power Hydrogen has no effect on the direction of Imperial Brands i.e., Imperial Brands and Clean Power go up and down completely randomly.

Pair Corralation between Imperial Brands and Clean Power

Assuming the 90 days trading horizon Imperial Brands PLC is expected to generate 0.44 times more return on investment than Clean Power. However, Imperial Brands PLC is 2.25 times less risky than Clean Power. It trades about 0.15 of its potential returns per unit of risk. Clean Power Hydrogen is currently generating about -0.13 per unit of risk. If you would invest  251,490  in Imperial Brands PLC on December 23, 2024 and sell it today you would earn a total of  21,910  from holding Imperial Brands PLC or generate 8.71% return on investment over 90 days.

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

Imperial Brands PLC  vs.  Clean Power Hydrogen

Imperial Brands PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Brands PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Imperial Brands may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Clean Power Hydrogen

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clean Power Hydrogen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Imperial Brands and Clean Power

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

The idea behind Imperial Brands PLC and Clean Power Hydrogen 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.