Correlation Between Imperial Petroleum and Transocean
Can any of the company-specific risk be diversified away by investing in both Imperial Petroleum and Transocean 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 Transocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Imperial Petroleum Preferred and Transocean, you can compare the effects of market volatilities on Imperial Petroleum and Transocean 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 Transocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Petroleum and Transocean.
Diversification Opportunities for Imperial Petroleum and Transocean
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Imperial and Transocean is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Petroleum Preferred and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Preferred are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Imperial Petroleum i.e., Imperial Petroleum and Transocean go up and down completely randomly.
Pair Corralation between Imperial Petroleum and Transocean
Assuming the 90 days horizon Imperial Petroleum is expected to generate 5.84 times less return on investment than Transocean. But when comparing it to its historical volatility, Imperial Petroleum Preferred is 5.17 times less risky than Transocean. It trades about 0.11 of its potential returns per unit of risk. Transocean is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 403.00 in Transocean on August 27, 2024 and sell it today you would earn a total of 35.00 from holding Transocean or generate 8.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Imperial Petroleum Preferred vs. Transocean
Performance |
| Timeline |
| Imperial Petroleum |
| Transocean |
Imperial Petroleum and Transocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Petroleum and Transocean
The main advantage of trading using opposite Imperial Petroleum and Transocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Petroleum position performs unexpectedly, Transocean 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 Transocean will offset losses from the drop in Transocean's long position.| Imperial Petroleum vs. Imperial Petroleum | Imperial Petroleum vs. Dynagas LNG Partners | Imperial Petroleum vs. GasLog Partners LP | Imperial Petroleum vs. GasLog Partners LP |
| Transocean vs. Nabors Industries | Transocean vs. Precision Drilling | Transocean vs. Seadrill Limited | Transocean vs. Patterson UTI Energy |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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