Correlation Between InPlay Oil and Emera Pref

Can any of the company-specific risk be diversified away by investing in both InPlay Oil and Emera Pref 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 InPlay Oil and Emera Pref into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between InPlay Oil Corp and Emera Pref A, you can compare the effects of market volatilities on InPlay Oil and Emera Pref 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 InPlay Oil with a short position of Emera Pref. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and Emera Pref.

Diversification Opportunities for InPlay Oil and Emera Pref

-0.69

Correlation Coefficient

InPlay Oil  Emera Pref

Excellent diversification

The 3 months correlation between InPlay and Emera is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Emera Pref A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Pref A and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with Emera Pref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Pref A has no effect on the direction of InPlay Oil i.e., InPlay Oil and Emera Pref go up and down completely randomly.

Pair Corralation between InPlay Oil and Emera Pref

Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the Emera Pref. In addition to that, InPlay Oil is 2.7 times more volatile than Emera Pref A. It trades about -0.13 of its total potential returns per unit of risk. Emera Pref A is currently generating about 0.24 per unit of volatility. If you would invest  1,515  in Emera Pref A on October 11, 2024 and sell it today you would earn a total of  175.00  from holding Emera Pref A or generate 11.55% return on investment over 90 days.

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

InPlay Oil Corp  vs.  Emera Pref A

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Emera Pref A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Pref A are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Emera Pref may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with InPlay Oil and Emera Pref

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

The idea behind InPlay Oil Corp and Emera Pref A 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.