Correlation Between Imperial Oil and Adams Resources

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Can any of the company-specific risk be diversified away by investing in both Imperial Oil and Adams Resources 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 Imperial Oil and Adams Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Imperial Oil and Adams Resources Energy, you can compare the effects of market volatilities on Imperial Oil and Adams Resources 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 Imperial Oil with a short position of Adams Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Oil and Adams Resources.

Diversification Opportunities for Imperial Oil and Adams Resources

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Imperial and Adams is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil and Adams Resources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Resources Energy and Imperial Oil 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 Imperial Oil are associated (or correlated) with Adams Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Resources Energy has no effect on the direction of Imperial Oil i.e., Imperial Oil and Adams Resources go up and down completely randomly.

Pair Corralation between Imperial Oil and Adams Resources

Considering the 90-day investment horizon Imperial Oil is expected to generate 0.26 times more return on investment than Adams Resources. However, Imperial Oil is 3.82 times less risky than Adams Resources. It trades about 0.52 of its potential returns per unit of risk. Adams Resources Energy is currently generating about 0.12 per unit of risk. If you would invest  6,163  in Imperial Oil on December 30, 2023 and sell it today you would earn a total of  750.00  from holding Imperial Oil or generate 12.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Imperial Oil  vs.  Adams Resources Energy

 Performance 
       Timeline  
Imperial Oil 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Imperial Oil displayed solid returns over the last few months and may actually be approaching a breakup point.
Adams Resources Energy 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Adams Resources Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Adams Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Imperial Oil and Adams Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Imperial Oil and Adams Resources

The main advantage of trading using opposite Imperial Oil and Adams Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Oil position performs unexpectedly, Adams Resources 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 Adams Resources will offset losses from the drop in Adams Resources' long position.
The idea behind Imperial Oil and Adams Resources Energy 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 CEOs Directory module to screen CEOs from public companies around the world.

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