Correlation Between Santa Fe and Imperial Res

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

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

Diversification Opportunities for Santa Fe and Imperial Res

0.0

Correlation Coefficient

Santa Fe  Imperial Res

Pay attention - limited upside

The 3 months correlation between Santa and Imperial is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Santa Fe Petroleum and Imperial Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Res and Santa Fe 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 Santa Fe Petroleum are associated (or correlated) with Imperial Res. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Res has no effect on the direction of Santa Fe i.e., Santa Fe and Imperial Res go up and down completely randomly.

Pair Corralation between Santa Fe and Imperial Res

Given the investment horizon of 90 days Santa Fe Petroleum is expected to under-perform the Imperial Res. But the pink sheet apears to be less risky and, when comparing its historical volatility, Santa Fe Petroleum is 17.15 times less risky than Imperial Res. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Imperial Res is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Imperial Res on September 26, 2024 and sell it today you would lose (0.03) from holding Imperial Res or give up 60.0% of portfolio value over 90 days.

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

Santa Fe Petroleum  vs.  Imperial Res

Santa Fe Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santa Fe Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Santa Fe is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with Santa Fe and Imperial Res

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

The idea behind Santa Fe Petroleum and Imperial Res 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.