Correlation Between El Paso and Imperial Petroleum

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

Diversification Opportunities for El Paso and Imperial Petroleum

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between EP-PC and Imperial is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding El Paso Energy and Imperial Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Petroleum and El Paso 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 El Paso Energy are associated (or correlated) with Imperial Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Petroleum has no effect on the direction of El Paso i.e., El Paso and Imperial Petroleum go up and down completely randomly.

Pair Corralation between El Paso and Imperial Petroleum

Assuming the 90 days horizon El Paso Energy is expected to generate 0.42 times more return on investment than Imperial Petroleum. However, El Paso Energy is 2.41 times less risky than Imperial Petroleum. It trades about 0.0 of its potential returns per unit of risk. Imperial Petroleum is currently generating about -0.41 per unit of risk. If you would invest  4,840  in El Paso Energy on August 24, 2024 and sell it today you would lose (2.00) from holding El Paso Energy or give up 0.04% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

El Paso Energy  vs.  Imperial Petroleum

 Performance 
       Timeline  
El Paso Energy 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in El Paso Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, El Paso is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Imperial Petroleum 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Imperial Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

El Paso and Imperial Petroleum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with El Paso and Imperial Petroleum

The main advantage of trading using opposite El Paso and Imperial Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Paso position performs unexpectedly, Imperial Petroleum 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 Petroleum will offset losses from the drop in Imperial Petroleum's long position.
The idea behind El Paso Energy and Imperial Petroleum 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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