Correlation Between Imperial Res and Coastal Caribbean

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

By analyzing existing cross correlation between Imperial Res and Coastal Caribbean Oils, you can compare the effects of market volatilities on Imperial Res and Coastal Caribbean 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 Coastal Caribbean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Res and Coastal Caribbean.

Diversification Opportunities for Imperial Res and Coastal Caribbean

-0.28

Correlation Coefficient

Imperial Res  Coastal Caribbean

Very good diversification

The 3 months correlation between Imperial and Coastal is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Res and Coastal Caribbean Oils in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Caribbean Oils 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 Coastal Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Caribbean Oils has no effect on the direction of Imperial Res i.e., Imperial Res and Coastal Caribbean go up and down completely randomly.

Pair Corralation between Imperial Res and Coastal Caribbean

If you would invest  0.04  in Imperial Res on August 3, 2024 and sell it today you would lose (0.02) from holding Imperial Res or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Imperial Res  vs.  Coastal Caribbean Oils

Imperial Res

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Res are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Imperial Res exhibited solid returns over the last few months and may actually be approaching a breakup point.

Coastal Caribbean Oils

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coastal Caribbean Oils has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Coastal Caribbean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Imperial Res and Coastal Caribbean

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

The idea behind Imperial Res and Coastal Caribbean Oils 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.