Correlation Between Imperial Brands and ELECTRIC POWER

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

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

Diversification Opportunities for Imperial Brands and ELECTRIC POWER

0.21

Correlation Coefficient

Imperial Brands  ELECTRIC POWER

Modest diversification

The 3 months correlation between Imperial and ELECTRIC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and ELECTRIC POWER DEVL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRIC POWER DEVL and Imperial Brands 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 Brands PLC are associated (or correlated) with ELECTRIC POWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECTRIC POWER DEVL has no effect on the direction of Imperial Brands i.e., Imperial Brands and ELECTRIC POWER go up and down completely randomly.

Pair Corralation between Imperial Brands and ELECTRIC POWER

Assuming the 90 days horizon Imperial Brands PLC is expected to under-perform the ELECTRIC POWER. In addition to that, Imperial Brands is 2.14 times more volatile than ELECTRIC POWER DEVL. It trades about -0.06 of its total potential returns per unit of risk. ELECTRIC POWER DEVL is currently generating about 0.02 per unit of volatility. If you would invest  1,550  in ELECTRIC POWER DEVL on May 6, 2025 and sell it today you would earn a total of  10.00  from holding ELECTRIC POWER DEVL or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Imperial Brands PLC  vs.  ELECTRIC POWER DEVL

Imperial Brands PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Imperial Brands PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Imperial Brands is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ELECTRIC POWER DEVL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELECTRIC POWER DEVL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, ELECTRIC POWER is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Imperial Brands and ELECTRIC POWER

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

The idea behind Imperial Brands PLC and ELECTRIC POWER DEVL 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.