Correlation Between Arcontech Group and BP Plc
Can any of the company-specific risk be diversified away by investing in both Arcontech Group 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 Arcontech Group and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arcontech Group Plc and BP plc, you can compare the effects of market volatilities on Arcontech Group 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 Arcontech Group with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcontech Group and BP Plc.
Diversification Opportunities for Arcontech Group and BP Plc
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Arcontech and BP-A is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Arcontech Group Plc and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Arcontech Group 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 Arcontech Group Plc 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 Arcontech Group i.e., Arcontech Group and BP Plc go up and down completely randomly.
Pair Corralation between Arcontech Group and BP Plc
Assuming the 90 days trading horizon Arcontech Group Plc is expected to generate 1.58 times more return on investment than BP Plc. However, Arcontech Group is 1.58 times more volatile than BP plc. It trades about 0.06 of its potential returns per unit of risk. BP plc is currently generating about -0.03 per unit of risk. If you would invest 6,684 in Arcontech Group Plc on November 2, 2024 and sell it today you would earn a total of 4,466 from holding Arcontech Group Plc or generate 66.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 97.99% |
Values | Daily Returns |
Arcontech Group Plc vs. BP plc
Performance |
Timeline |
Arcontech Group Plc |
BP plc |
Arcontech Group and BP Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Arcontech Group and BP Plc
The main advantage of trading using opposite Arcontech Group and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcontech Group 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.Arcontech Group vs. Mineral Financial Investments | Arcontech Group vs. Mobius Investment Trust | Arcontech Group vs. One Media iP | Arcontech Group vs. LBG Media PLC |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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