Correlation Between Imperial Oil and Adams Resources
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Imperial Oil vs. Adams Resources Energy
Performance |
Timeline |
Imperial Oil |
Adams Resources Energy |
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.Imperial Oil vs. Cisco Systems | Imperial Oil vs. Johnson Johnson | Imperial Oil vs. Merck Company | Imperial Oil vs. JPMorgan Chase Co |
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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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