Correlation Between Imperial Brands and Clean Power
Can any of the company-specific risk be diversified away by investing in both Imperial Brands and Clean Power 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 Brands and Clean Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Imperial Brands PLC and Clean Power Hydrogen, you can compare the effects of market volatilities on Imperial Brands and Clean Power 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 Brands with a short position of Clean Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and Clean Power.
Diversification Opportunities for Imperial Brands and Clean Power
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Imperial and Clean is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and Clean Power Hydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Power Hydrogen and Imperial Brands 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 Brands PLC are associated (or correlated) with Clean Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Power Hydrogen has no effect on the direction of Imperial Brands i.e., Imperial Brands and Clean Power go up and down completely randomly.
Pair Corralation between Imperial Brands and Clean Power
Assuming the 90 days trading horizon Imperial Brands PLC is expected to generate 0.58 times more return on investment than Clean Power. However, Imperial Brands PLC is 1.73 times less risky than Clean Power. It trades about 0.14 of its potential returns per unit of risk. Clean Power Hydrogen is currently generating about -0.39 per unit of risk. If you would invest 258,400 in Imperial Brands PLC on October 11, 2024 and sell it today you would earn a total of 4,900 from holding Imperial Brands PLC or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Imperial Brands PLC vs. Clean Power Hydrogen
Performance |
| Timeline |
| Imperial Brands PLC |
| Clean Power Hydrogen |
Imperial Brands and Clean Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Brands and Clean Power
The main advantage of trading using opposite Imperial Brands and Clean Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, Clean Power 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 Clean Power will offset losses from the drop in Clean Power's long position.| Imperial Brands vs. Hochschild Mining plc | Imperial Brands vs. One Media iP | Imperial Brands vs. Deltex Medical Group | Imperial Brands vs. Centaur Media |
| Clean Power vs. JB Hunt Transport | Clean Power vs. Wizz Air Holdings | Clean Power vs. Automatic Data Processing | Clean Power vs. Rosslyn Data Technologies |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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