Correlation Between Imperial Petroleum and Teekay

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

Diversification Opportunities for Imperial Petroleum and Teekay

-0.68

Correlation Coefficient

Imperial Petroleum  Teekay

Excellent diversification

The 3 months correlation between Imperial and Teekay is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Petroleum Preferred and Teekay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teekay 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 Teekay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teekay has no effect on the direction of Imperial Petroleum i.e., Imperial Petroleum and Teekay go up and down completely randomly.

Pair Corralation between Imperial Petroleum and Teekay

Assuming the 90 days horizon Imperial Petroleum Preferred is expected to under-perform the Teekay. But the preferred stock apears to be less risky and, when comparing its historical volatility, Imperial Petroleum Preferred is 3.51 times less risky than Teekay. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Teekay is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  666.00  in Teekay on September 27, 2024 and sell it today you would earn a total of  9.00  from holding Teekay or generate 1.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Imperial Petroleum Preferred  vs.  Teekay

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.

Teekay

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teekay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Imperial Petroleum and Teekay

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

The idea behind Imperial Petroleum Preferred and Teekay 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.