Correlation Between Imperial Petroleum and Keyera Corp

Can any of the company-specific risk be diversified away by investing in both Imperial Petroleum and Keyera Corp 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 Keyera Corp 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 Keyera Corp, you can compare the effects of market volatilities on Imperial Petroleum and Keyera Corp 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 Keyera Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Petroleum and Keyera Corp.

Diversification Opportunities for Imperial Petroleum and Keyera Corp

0.1

Correlation Coefficient

Imperial Petroleum  Keyera Corp

Average diversification

The 3 months correlation between Imperial and Keyera is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Petroleum Preferred and Keyera Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keyera Corp 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 Keyera Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keyera Corp has no effect on the direction of Imperial Petroleum i.e., Imperial Petroleum and Keyera Corp go up and down completely randomly.

Pair Corralation between Imperial Petroleum and Keyera Corp

Assuming the 90 days horizon Imperial Petroleum Preferred is expected to generate 0.61 times more return on investment than Keyera Corp. However, Imperial Petroleum Preferred is 1.63 times less risky than Keyera Corp. It trades about -0.13 of its potential returns per unit of risk. Keyera Corp is currently generating about -0.18 per unit of risk. If you would invest  2,539  in Imperial Petroleum Preferred on October 2, 2024 and sell it today you would lose (63.00) from holding Imperial Petroleum Preferred or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Imperial Petroleum Preferred  vs.  Keyera Corp

Imperial Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Petroleum Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Keyera Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keyera Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Keyera Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Imperial Petroleum and Keyera Corp

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

The idea behind Imperial Petroleum Preferred and Keyera Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.