Correlation Between Transportadora and Imperial Oil

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

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

Diversification Opportunities for Transportadora and Imperial Oil

-0.4

Correlation Coefficient

Transportadora  Imperial Oil

Very good diversification

The 3 months correlation between Transportadora and Imperial is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Imperial Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Oil and Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and Imperial Oil go up and down completely randomly.

Pair Corralation between Transportadora and Imperial Oil

Considering the 90-day investment horizon Transportadora de Gas is expected to generate 1.13 times more return on investment than Imperial Oil. However, Transportadora is 1.13 times more volatile than Imperial Oil. It trades about -0.01 of its potential returns per unit of risk. Imperial Oil is currently generating about -0.34 per unit of risk. If you would invest  2,919  in Transportadora de Gas on September 28, 2024 and sell it today you would lose (22.00) from holding Transportadora de Gas or give up 0.75% of portfolio value over 90 days.

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

Transportadora de Gas  vs.  Imperial Oil

Transportadora de Gas

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled 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 Transportadora and Imperial Oil

The main advantage of trading using opposite Transportadora and Imperial Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas 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 CEOs Directory module to screen CEOs from public companies around the world.