Correlation Between Pembina Pipeline and Imperial Oil

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

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

Diversification Opportunities for Pembina Pipeline and Imperial Oil

-0.17

Correlation Coefficient

Pembina Pipeline  Imperial Oil

Good diversification

The 3 months correlation between Pembina and Imperial is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil and Pembina Pipeline 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 Pembina Pipeline Corp 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 Pembina Pipeline i.e., Pembina Pipeline and Imperial Oil go up and down completely randomly.

Pair Corralation between Pembina Pipeline and Imperial Oil

Assuming the 90 days trading horizon Pembina Pipeline Corp is expected to generate 0.24 times more return on investment than Imperial Oil. However, Pembina Pipeline Corp is 4.11 times less risky than Imperial Oil. It trades about -0.23 of its potential returns per unit of risk. Imperial Oil is currently generating about -0.06 per unit of risk. If you would invest  2,304  in Pembina Pipeline Corp on December 5, 2024 and sell it today you would lose (44.00) from holding Pembina Pipeline Corp or give up 1.91% of portfolio value over 90 days.

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

Pembina Pipeline Corp  vs.  Imperial Oil

Pembina Pipeline Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Imperial Oil

Risk-Adjusted Performance

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 unfluctuating performance, the Stock's basic 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 Pembina Pipeline and Imperial Oil

The main advantage of trading using opposite Pembina Pipeline and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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 Pembina Pipeline Corp 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.