Correlation Between Imperial Petroleum and Indonesia Energy

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

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

Diversification Opportunities for Imperial Petroleum and Indonesia Energy

0.74

Correlation Coefficient

Imperial Petroleum  Indonesia Energy

Poor diversification

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

Pair Corralation between Imperial Petroleum and Indonesia Energy

Given the investment horizon of 90 days Imperial Petroleum is expected to under-perform the Indonesia Energy. But the stock apears to be less risky and, when comparing its historical volatility, Imperial Petroleum is 1.45 times less risky than Indonesia Energy. The stock trades about -0.11 of its potential returns per unit of risk. The Indonesia Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  276.00  in Indonesia Energy on December 30, 2024 and sell it today you would earn a total of  3.00  from holding Indonesia Energy or generate 1.09% return on investment over 90 days.

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

Imperial Petroleum  vs.  Indonesia Energy

Imperial Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Imperial Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Indonesia Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Indonesia Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Imperial Petroleum and Indonesia Energy

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

The idea behind Imperial Petroleum and Indonesia Energy 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.