Correlation Between BCPG Public and Energy Absolute
Can any of the company-specific risk be diversified away by investing in both BCPG Public and Energy Absolute 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 BCPG Public and Energy Absolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCPG Public and Energy Absolute Public, you can compare the effects of market volatilities on BCPG Public and Energy Absolute 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 BCPG Public with a short position of Energy Absolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCPG Public and Energy Absolute.
Diversification Opportunities for BCPG Public and Energy Absolute
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BCPG and Energy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BCPG Public and Energy Absolute Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Absolute Public and BCPG Public 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 BCPG Public are associated (or correlated) with Energy Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Absolute Public has no effect on the direction of BCPG Public i.e., BCPG Public and Energy Absolute go up and down completely randomly.
Pair Corralation between BCPG Public and Energy Absolute
Assuming the 90 days trading horizon BCPG Public is expected to generate 0.76 times more return on investment than Energy Absolute. However, BCPG Public is 1.31 times less risky than Energy Absolute. It trades about -0.24 of its potential returns per unit of risk. Energy Absolute Public is currently generating about -0.4 per unit of risk. If you would invest 720.00 in BCPG Public on August 29, 2024 and sell it today you would lose (150.00) from holding BCPG Public or give up 20.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.56% |
| Values | Daily Returns |
BCPG Public vs. Energy Absolute Public
Performance |
| Timeline |
| BCPG Public |
| Energy Absolute Public |
BCPG Public and Energy Absolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCPG Public and Energy Absolute
The main advantage of trading using opposite BCPG Public and Energy Absolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCPG Public position performs unexpectedly, Energy Absolute 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 Energy Absolute will offset losses from the drop in Energy Absolute's long position.| BCPG Public vs. WHA Public | BCPG Public vs. Global Power Synergy | BCPG Public vs. TPI Polene Power | BCPG Public vs. Bangkok Expressway and |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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