Correlation Between Imperial Petroleum and Houston American
Can any of the company-specific risk be diversified away by investing in both Imperial Petroleum and Houston American 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 Petroleum and Houston American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Imperial Petroleum and Houston American Energy, you can compare the effects of market volatilities on Imperial Petroleum and Houston American 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 Petroleum with a short position of Houston American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Petroleum and Houston American.
Diversification Opportunities for Imperial Petroleum and Houston American
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Imperial and Houston is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Petroleum and Houston American Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Houston American Energy and Imperial Petroleum 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 Petroleum are associated (or correlated) with Houston American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Houston American Energy has no effect on the direction of Imperial Petroleum i.e., Imperial Petroleum and Houston American go up and down completely randomly.
Pair Corralation between Imperial Petroleum and Houston American
Given the investment horizon of 90 days Imperial Petroleum is expected to under-perform the Houston American. But the stock apears to be less risky and, when comparing its historical volatility, Imperial Petroleum is 4.42 times less risky than Houston American. The stock trades about -0.5 of its potential returns per unit of risk. The Houston American Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 134.00 in Houston American Energy on August 27, 2024 and sell it today you would earn a total of 4.00 from holding Houston American Energy or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Imperial Petroleum vs. Houston American Energy
Performance |
| Timeline |
| Imperial Petroleum |
| Houston American Energy |
Imperial Petroleum and Houston American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Petroleum and Houston American
The main advantage of trading using opposite Imperial Petroleum and Houston American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Petroleum position performs unexpectedly, Houston American 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 Houston American will offset losses from the drop in Houston American's long position.| Imperial Petroleum vs. Western Midstream Partners | Imperial Petroleum vs. DT Midstream | Imperial Petroleum vs. MPLX LP | Imperial Petroleum vs. BP Prudhoe Bay |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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