Correlation Between Imperial Oil and AltaGas

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

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

Diversification Opportunities for Imperial Oil and AltaGas

0.12

Correlation Coefficient

Imperial Oil  AltaGas

Average diversification

The 3 months correlation between Imperial and AltaGas is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil and AltaGas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AltaGas and Imperial Oil 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 Oil are associated (or correlated) with AltaGas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AltaGas has no effect on the direction of Imperial Oil i.e., Imperial Oil and AltaGas go up and down completely randomly.

Pair Corralation between Imperial Oil and AltaGas

Assuming the 90 days trading horizon Imperial Oil is expected to generate 1.35 times more return on investment than AltaGas. However, Imperial Oil is 1.35 times more volatile than AltaGas. It trades about 0.15 of its potential returns per unit of risk. AltaGas is currently generating about 0.19 per unit of risk. If you would invest  9,809  in Imperial Oil on September 4, 2024 and sell it today you would earn a total of  436.00  from holding Imperial Oil or generate 4.44% return on investment over 90 days.

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

Imperial Oil  vs.  AltaGas

Imperial Oil

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Imperial Oil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AltaGas

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AltaGas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AltaGas is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Imperial Oil and AltaGas

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

The idea behind Imperial Oil and AltaGas 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 Stocks Directory module to find actively traded stocks across global markets.