Correlation Between Sparx Technology and Imperial Oil

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

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

Diversification Opportunities for Sparx Technology and Imperial Oil

0.04

Correlation Coefficient

Sparx Technology  Imperial Oil

Significant diversification

The 3 months correlation between Sparx and Imperial is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sparx Technology and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil and Sparx Technology 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 Sparx Technology 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 Sparx Technology i.e., Sparx Technology and Imperial Oil go up and down completely randomly.

Pair Corralation between Sparx Technology and Imperial Oil

Assuming the 90 days trading horizon Sparx Technology is expected to under-perform the Imperial Oil. In addition to that, Sparx Technology is 1.67 times more volatile than Imperial Oil. It trades about -0.34 of its total potential returns per unit of risk. Imperial Oil is currently generating about -0.06 per unit of volatility. If you would invest  9,732  in Imperial Oil on December 5, 2024 and sell it today you would lose (238.00) from holding Imperial Oil or give up 2.45% of portfolio value over 90 days.

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

Sparx Technology  vs.  Imperial Oil

Sparx Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparx Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated 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 Sparx Technology and Imperial Oil

The main advantage of trading using opposite Sparx Technology and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparx Technology 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 Sparx Technology 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.