Correlation Between Imperial Res and Permian Resources
Can any of the company-specific risk be diversified away by investing in both Imperial Res and Permian Resources 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 Res and Permian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Imperial Res and Permian Resources, you can compare the effects of market volatilities on Imperial Res and Permian Resources 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 Res with a short position of Permian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Res and Permian Resources.
Diversification Opportunities for Imperial Res and Permian Resources
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Imperial and Permian is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Res and Permian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Permian Resources and Imperial Res 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 Res are associated (or correlated) with Permian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Permian Resources has no effect on the direction of Imperial Res i.e., Imperial Res and Permian Resources go up and down completely randomly.
Pair Corralation between Imperial Res and Permian Resources
Given the investment horizon of 90 days Imperial Res is expected to generate 19.28 times more return on investment than Permian Resources. However, Imperial Res is 19.28 times more volatile than Permian Resources. It trades about 0.05 of its potential returns per unit of risk. Permian Resources is currently generating about 0.07 per unit of risk. If you would invest 0.05 in Imperial Res on August 28, 2024 and sell it today you would lose (0.03) from holding Imperial Res or give up 60.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Imperial Res vs. Permian Resources
Performance |
| Timeline |
| Imperial Res |
| Permian Resources |
Imperial Res and Permian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Res and Permian Resources
The main advantage of trading using opposite Imperial Res and Permian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Res position performs unexpectedly, Permian Resources 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 Permian Resources will offset losses from the drop in Permian Resources' long position.The idea behind Imperial Res and Permian Resources 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.| Permian Resources vs. ConocoPhillips | Permian Resources vs. Occidental Petroleum | Permian Resources vs. EOG Resources | Permian Resources vs. Coterra 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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