Correlation Between ONEOK and BP Plc
Can any of the company-specific risk be diversified away by investing in both ONEOK and BP Plc 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 ONEOK and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ONEOK Inc and BP plc, you can compare the effects of market volatilities on ONEOK and BP Plc 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 ONEOK with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of ONEOK and BP Plc.
Diversification Opportunities for ONEOK and BP Plc
Very weak diversification
The 3 months correlation between ONEOK and BP-A is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ONEOK Inc and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and ONEOK 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 ONEOK Inc are associated (or correlated) with BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of ONEOK i.e., ONEOK and BP Plc go up and down completely randomly.
Pair Corralation between ONEOK and BP Plc
Assuming the 90 days trading horizon ONEOK Inc is expected to generate 1.15 times more return on investment than BP Plc. However, ONEOK is 1.15 times more volatile than BP plc. It trades about 0.07 of its potential returns per unit of risk. BP plc is currently generating about -0.03 per unit of risk. If you would invest 6,374 in ONEOK Inc on November 2, 2024 and sell it today you would earn a total of 3,649 from holding ONEOK Inc or generate 57.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.59% |
| Values | Daily Returns |
ONEOK Inc vs. BP plc
Performance |
| Timeline |
| ONEOK Inc |
| BP plc |
ONEOK and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ONEOK and BP Plc
The main advantage of trading using opposite ONEOK and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ONEOK position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.| ONEOK vs. Playtech Plc | ONEOK vs. Logitech International SA | ONEOK vs. Ashtead Technology Holdings | ONEOK vs. Westlake Chemical Corp |
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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