Correlation Between Imperial Oil and INDUSTRIAL MINERALS

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

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

Diversification Opportunities for Imperial Oil and INDUSTRIAL MINERALS

0.58

Correlation Coefficient

Imperial Oil  INDUSTRIAL MINERALS

Very weak diversification

The 3 months correlation between Imperial and INDUSTRIAL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil Limited and INDUSTRIAL MINERALS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDUSTRIAL MINERALS LTD 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 Limited are associated (or correlated) with INDUSTRIAL MINERALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDUSTRIAL MINERALS LTD has no effect on the direction of Imperial Oil i.e., Imperial Oil and INDUSTRIAL MINERALS go up and down completely randomly.

Pair Corralation between Imperial Oil and INDUSTRIAL MINERALS

Assuming the 90 days horizon Imperial Oil Limited is expected to under-perform the INDUSTRIAL MINERALS. But the stock apears to be less risky and, when comparing its historical volatility, Imperial Oil Limited is 2.75 times less risky than INDUSTRIAL MINERALS. The stock trades about -0.28 of its potential returns per unit of risk. The INDUSTRIAL MINERALS LTD is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  8.70  in INDUSTRIAL MINERALS LTD on October 9, 2024 and sell it today you would lose (0.95) from holding INDUSTRIAL MINERALS LTD or give up 10.92% of portfolio value over 90 days.

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

Imperial Oil Limited  vs.  INDUSTRIAL MINERALS LTD

Imperial Oil Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Oil Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

INDUSTRIAL MINERALS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INDUSTRIAL MINERALS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Imperial Oil and INDUSTRIAL MINERALS

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

The idea behind Imperial Oil Limited and INDUSTRIAL MINERALS LTD 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 CEOs Directory module to screen CEOs from public companies around the world.