Correlation Between BP Plc and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both BP Plc and Vulcan Materials 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 BP Plc and Vulcan Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP plc and Vulcan Materials Co, you can compare the effects of market volatilities on BP Plc and Vulcan Materials 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 BP Plc with a short position of Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and Vulcan Materials.
Diversification Opportunities for BP Plc and Vulcan Materials
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BP-A and Vulcan is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and Vulcan Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials and BP Plc 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 BP plc are associated (or correlated) with Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of BP Plc i.e., BP Plc and Vulcan Materials go up and down completely randomly.
Pair Corralation between BP Plc and Vulcan Materials
Assuming the 90 days trading horizon BP plc is expected to under-perform the Vulcan Materials. But the stock apears to be less risky and, when comparing its historical volatility, BP plc is 1.34 times less risky than Vulcan Materials. The stock trades about -0.19 of its potential returns per unit of risk. The Vulcan Materials Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 27,390 in Vulcan Materials Co on September 2, 2024 and sell it today you would earn a total of 1,396 from holding Vulcan Materials Co or generate 5.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP plc vs. Vulcan Materials Co
Performance |
| Timeline |
| BP plc |
| Vulcan Materials |
BP Plc and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plc and Vulcan Materials
The main advantage of trading using opposite BP Plc and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.| BP Plc vs. Oakley Capital Investments | BP Plc vs. Ion Beam Applications | BP Plc vs. Diversified Energy | BP Plc vs. Aurora Investment Trust |
| Vulcan Materials vs. Uniper SE | Vulcan Materials vs. Mulberry Group PLC | Vulcan Materials vs. London Security Plc | Vulcan Materials vs. Triad Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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