Correlation Between Imperial Petroleum and Tsakos Energy

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

Diversification Opportunities for Imperial Petroleum and Tsakos Energy

-0.59

Correlation Coefficient

Imperial Petroleum  Tsakos Energy

Excellent diversification

The 3 months correlation between Imperial and Tsakos is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Petroleum Preferred and Tsakos Energy Navigation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsakos Energy Navigation 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 Tsakos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsakos Energy Navigation has no effect on the direction of Imperial Petroleum i.e., Imperial Petroleum and Tsakos Energy go up and down completely randomly.

Pair Corralation between Imperial Petroleum and Tsakos Energy

Assuming the 90 days horizon Imperial Petroleum Preferred is expected to generate 0.4 times more return on investment than Tsakos Energy. However, Imperial Petroleum Preferred is 2.48 times less risky than Tsakos Energy. It trades about 0.13 of its potential returns per unit of risk. Tsakos Energy Navigation is currently generating about -0.2 per unit of risk. If you would invest  2,385  in Imperial Petroleum Preferred on August 30, 2024 and sell it today you would earn a total of  175.00  from holding Imperial Petroleum Preferred or generate 7.34% return on investment over 90 days.

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

Imperial Petroleum Preferred  vs.  Tsakos Energy Navigation

Imperial Petroleum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Petroleum Preferred are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Imperial Petroleum may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Tsakos Energy Navigation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsakos Energy Navigation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Imperial Petroleum and Tsakos Energy

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

The idea behind Imperial Petroleum Preferred and Tsakos Energy Navigation 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.