Correlation Between El Paso and Imperial Petroleum
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 Preferred, 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
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EP-PC and Imperial is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding El Paso Energy and Imperial Petroleum Preferred 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 is expected to generate 1.33 times less return on investment than Imperial Petroleum. But when comparing it to its historical volatility, El Paso Energy is 1.95 times less risky than Imperial Petroleum. It trades about 0.12 of its potential returns per unit of risk. Imperial Petroleum Preferred is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,315 in Imperial Petroleum Preferred on August 24, 2024 and sell it today you would earn a total of 215.00 from holding Imperial Petroleum Preferred or generate 9.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
El Paso Energy vs. Imperial Petroleum Preferred
Performance |
| Timeline |
| El Paso Energy |
| Imperial Petroleum |
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.| El Paso vs. Dynagas LNG Partners | El Paso vs. GasLog Partners LP | El Paso vs. Aquagold International | El Paso vs. Morningstar Unconstrained Allocation |
| Imperial Petroleum vs. Imperial Petroleum | Imperial Petroleum vs. Dynagas LNG Partners | Imperial Petroleum vs. GasLog Partners LP | Imperial Petroleum vs. GasLog Partners LP |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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