Correlation Between Imperial Res and Sky Petroleum

Can any of the company-specific risk be diversified away by investing in both Imperial Res and Sky Petroleum 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 Res and Sky Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Imperial Res and Sky Petroleum, you can compare the effects of market volatilities on Imperial Res and Sky Petroleum 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 Res with a short position of Sky Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Res and Sky Petroleum.

Diversification Opportunities for Imperial Res and Sky Petroleum

0.08

Correlation Coefficient

Imperial Res  Sky Petroleum

Significant diversification

The 3 months correlation between Imperial and Sky is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Res and Sky Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Petroleum and Imperial Res 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 Res are associated (or correlated) with Sky Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Petroleum has no effect on the direction of Imperial Res i.e., Imperial Res and Sky Petroleum go up and down completely randomly.

Pair Corralation between Imperial Res and Sky Petroleum

If you would invest  0.00  in Sky Petroleum on September 26, 2024 and sell it today you would earn a total of  0.00  from holding Sky Petroleum or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Imperial Res  vs.  Sky Petroleum

Imperial Res

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Res are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Imperial Res exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sky Petroleum

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Sky Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, Sky Petroleum demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Imperial Res and Sky Petroleum

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

The idea behind Imperial Res and Sky Petroleum 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.