Correlation Between Keyera Corp and Imperial Petroleum

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

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

Diversification Opportunities for Keyera Corp and Imperial Petroleum

0.1

Correlation Coefficient

Keyera Corp  Imperial Petroleum

Average diversification

The 3 months correlation between Keyera and Imperial is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Keyera Corp and Imperial Petroleum Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Petroleum and Keyera Corp 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 Keyera Corp are associated (or correlated) with Imperial Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Petroleum has no effect on the direction of Keyera Corp i.e., Keyera Corp and Imperial Petroleum go up and down completely randomly.

Pair Corralation between Keyera Corp and Imperial Petroleum

Assuming the 90 days horizon Keyera Corp is expected to under-perform the Imperial Petroleum. In addition to that, Keyera Corp is 1.63 times more volatile than Imperial Petroleum Preferred. It trades about -0.18 of its total potential returns per unit of risk. Imperial Petroleum Preferred is currently generating about -0.13 per unit of volatility. If you would invest  2,539  in Imperial Petroleum Preferred on October 2, 2024 and sell it today you would lose (63.00) from holding Imperial Petroleum Preferred or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Keyera Corp  vs.  Imperial Petroleum Preferred

Keyera Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keyera Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Keyera Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Imperial Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Petroleum Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Keyera Corp and Imperial Petroleum

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

The idea behind Keyera Corp and Imperial Petroleum Preferred 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.