Correlation Between Imperial Oil and National Fuel

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

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

Diversification Opportunities for Imperial Oil and National Fuel

0.74

Correlation Coefficient

Imperial Oil  National Fuel

Poor diversification

The 3 months correlation between Imperial and National is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil and National Fuel Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Fuel Gas 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 National Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Fuel Gas has no effect on the direction of Imperial Oil i.e., Imperial Oil and National Fuel go up and down completely randomly.

Pair Corralation between Imperial Oil and National Fuel

Considering the 90-day investment horizon Imperial Oil is expected to generate 1.44 times less return on investment than National Fuel. In addition to that, Imperial Oil is 1.73 times more volatile than National Fuel Gas. It trades about 0.16 of its total potential returns per unit of risk. National Fuel Gas is currently generating about 0.4 per unit of volatility. If you would invest  6,044  in National Fuel Gas on December 29, 2024 and sell it today you would earn a total of  1,824  from holding National Fuel Gas or generate 30.18% return on investment over 90 days.

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

Imperial Oil  vs.  National Fuel Gas

Imperial Oil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Imperial Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

National Fuel Gas

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in National Fuel Gas are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, National Fuel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Imperial Oil and National Fuel

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

The idea behind Imperial Oil and National Fuel Gas 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.