Correlation Between Food Life and BP Plc
Can any of the company-specific risk be diversified away by investing in both Food Life 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 Food Life and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Food Life Companies and BP plc, you can compare the effects of market volatilities on Food Life 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 Food Life with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and BP Plc.
Diversification Opportunities for Food Life and BP Plc
Very good diversification
The 3 months correlation between Food and BSU is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Food Life 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 Food Life Companies 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 Food Life i.e., Food Life and BP Plc go up and down completely randomly.
Pair Corralation between Food Life and BP Plc
Assuming the 90 days horizon Food Life Companies is expected to generate 1.12 times more return on investment than BP Plc. However, Food Life is 1.12 times more volatile than BP plc. It trades about 0.21 of its potential returns per unit of risk. BP plc is currently generating about -0.08 per unit of risk. If you would invest 1,690 in Food Life Companies on September 2, 2024 and sell it today you would earn a total of 450.00 from holding Food Life Companies or generate 26.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Food Life Companies vs. BP plc
Performance |
| Timeline |
| Food Life Companies |
| BP plc |
Food Life and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Food Life and BP Plc
The main advantage of trading using opposite Food Life and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life 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.| Food Life vs. Insurance Australia Group | Food Life vs. United Insurance Holdings | Food Life vs. American Airlines Group | Food Life vs. SINGAPORE AIRLINES |
| BP Plc vs. Lifeway Foods | BP Plc vs. CN MODERN DAIRY | BP Plc vs. Food Life Companies | BP Plc vs. ADRIATIC METALS LS 013355 |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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