Correlation Between ERHC Energy and Imperial Res

Can any of the company-specific risk be diversified away by investing in both ERHC Energy and Imperial Res 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 ERHC Energy and Imperial Res into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ERHC Energy and Imperial Res, you can compare the effects of market volatilities on ERHC Energy and Imperial Res 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 ERHC Energy with a short position of Imperial Res. Check out your portfolio center. Please also check ongoing floating volatility patterns of ERHC Energy and Imperial Res.

Diversification Opportunities for ERHC Energy and Imperial Res

0.32

Correlation Coefficient

ERHC Energy  Imperial Res

Weak diversification

The 3 months correlation between ERHC and Imperial is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ERHC Energy and Imperial Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imperial Res and ERHC Energy 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 ERHC Energy are associated (or correlated) with Imperial Res. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imperial Res has no effect on the direction of ERHC Energy i.e., ERHC Energy and Imperial Res go up and down completely randomly.

Pair Corralation between ERHC Energy and Imperial Res

If you would invest  0.01  in ERHC Energy on May 5, 2025 and sell it today you would earn a total of  0.00  from holding ERHC Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

ERHC Energy  vs.  Imperial Res

ERHC Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ERHC Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, ERHC Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Imperial Res

Risk-Adjusted Performance

Very Weak

Over the last 90 days Imperial Res has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Imperial Res is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ERHC Energy and Imperial Res

The main advantage of trading using opposite ERHC Energy and Imperial Res positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ERHC Energy position performs unexpectedly, Imperial Res 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 Res will offset losses from the drop in Imperial Res' long position.

The idea behind ERHC Energy and Imperial Res 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.