Correlation Between MRC Global and Imperial Oil

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

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

Diversification Opportunities for MRC Global and Imperial Oil

0.13

Correlation Coefficient

MRC Global  Imperial Oil

Average diversification

The 3 months correlation between MRC and Imperial is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding MRC Global and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil and MRC Global 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 MRC Global are associated (or correlated) with Imperial Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Oil has no effect on the direction of MRC Global i.e., MRC Global and Imperial Oil go up and down completely randomly.

Pair Corralation between MRC Global and Imperial Oil

Considering the 90-day investment horizon MRC Global is expected to generate 0.85 times more return on investment than Imperial Oil. However, MRC Global is 1.18 times less risky than Imperial Oil. It trades about 0.06 of its potential returns per unit of risk. Imperial Oil is currently generating about -0.15 per unit of risk. If you would invest  1,399  in MRC Global on October 22, 2024 and sell it today you would earn a total of  44.00  from holding MRC Global or generate 3.15% return on investment over 90 days.

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

MRC Global  vs.  Imperial Oil

MRC Global

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MRC Global are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, MRC Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Imperial Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with MRC Global and Imperial Oil

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

The idea behind MRC Global and Imperial Oil 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.