Correlation Between Imperial Petroleum and Sabine Royalty

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

Diversification Opportunities for Imperial Petroleum and Sabine Royalty

0.57

Correlation Coefficient

Imperial Petroleum  Sabine Royalty

Very weak diversification

The 3 months correlation between Imperial and Sabine is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Petroleum Preferred and Sabine Royalty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabine Royalty Trust 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 Sabine Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabine Royalty Trust has no effect on the direction of Imperial Petroleum i.e., Imperial Petroleum and Sabine Royalty go up and down completely randomly.

Pair Corralation between Imperial Petroleum and Sabine Royalty

Assuming the 90 days horizon Imperial Petroleum is expected to generate 2.8 times less return on investment than Sabine Royalty. But when comparing it to its historical volatility, Imperial Petroleum Preferred is 1.87 times less risky than Sabine Royalty. It trades about 0.09 of its potential returns per unit of risk. Sabine Royalty Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,890  in Sabine Royalty Trust on September 25, 2024 and sell it today you would earn a total of  692.00  from holding Sabine Royalty Trust or generate 11.75% return on investment over 90 days.

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

Imperial Petroleum Preferred  vs.  Sabine Royalty Trust

Imperial Petroleum

Risk-Adjusted Performance

7 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Petroleum Preferred are ranked lower than 7 (%) 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.

Sabine Royalty Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sabine Royalty Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Sabine Royalty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Imperial Petroleum and Sabine Royalty

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

The idea behind Imperial Petroleum Preferred and Sabine Royalty Trust 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.