Correlation Between InPlay Oil and Pembina Pipeline

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

Diversification Opportunities for InPlay Oil and Pembina Pipeline

0.35

Correlation Coefficient

InPlay Oil  Pembina Pipeline

Weak diversification

The 3 months correlation between InPlay and Pembina is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of InPlay Oil i.e., InPlay Oil and Pembina Pipeline go up and down completely randomly.

Pair Corralation between InPlay Oil and Pembina Pipeline

Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the Pembina Pipeline. In addition to that, InPlay Oil is 3.22 times more volatile than Pembina Pipeline Corp. It trades about -0.16 of its total potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.01 per unit of volatility. If you would invest  2,243  in Pembina Pipeline Corp on September 29, 2024 and sell it today you would earn a total of  4.00  from holding Pembina Pipeline Corp or generate 0.18% return on investment over 90 days.

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

InPlay Oil Corp  vs.  Pembina Pipeline Corp

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Pembina Pipeline is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with InPlay Oil and Pembina Pipeline

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

The idea behind InPlay Oil Corp and Pembina Pipeline 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.