Correlation Between Imperial Petroleum and Dynagas LNG

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

By analyzing existing cross correlation between Imperial Petroleum Preferred and Dynagas LNG Partners, you can compare the effects of market volatilities on Imperial Petroleum and Dynagas LNG 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 Dynagas LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Petroleum and Dynagas LNG.

Diversification Opportunities for Imperial Petroleum and Dynagas LNG

0.72

Correlation Coefficient

Imperial Petroleum  Dynagas LNG

Poor diversification

The 3 months correlation between Imperial and Dynagas is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Petroleum Preferred and Dynagas LNG Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynagas LNG Partners 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 Preferred are associated (or correlated) with Dynagas LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynagas LNG Partners has no effect on the direction of Imperial Petroleum i.e., Imperial Petroleum and Dynagas LNG go up and down completely randomly.

Pair Corralation between Imperial Petroleum and Dynagas LNG

Assuming the 90 days horizon Imperial Petroleum Preferred is expected to under-perform the Dynagas LNG. But the preferred stock apears to be less risky and, when comparing its historical volatility, Imperial Petroleum Preferred is 4.11 times less risky than Dynagas LNG. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Dynagas LNG Partners is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  385.00  in Dynagas LNG Partners on September 27, 2024 and sell it today you would earn a total of  155.00  from holding Dynagas LNG Partners or generate 40.26% return on investment over 90 days.

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

Imperial Petroleum Preferred  vs.  Dynagas LNG Partners

Imperial Petroleum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Petroleum Preferred are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Imperial Petroleum is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Dynagas LNG Partners

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dynagas LNG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Imperial Petroleum and Dynagas LNG

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

The idea behind Imperial Petroleum Preferred and Dynagas LNG Partners 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.