Correlation Between BP Plc and Kinnevik Investment
Can any of the company-specific risk be diversified away by investing in both BP Plc and Kinnevik Investment 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 Kinnevik Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP plc and Kinnevik Investment AB, you can compare the effects of market volatilities on BP Plc and Kinnevik Investment 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 Kinnevik Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and Kinnevik Investment.
Diversification Opportunities for BP Plc and Kinnevik Investment
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BP-A and Kinnevik is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment 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 Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of BP Plc i.e., BP Plc and Kinnevik Investment go up and down completely randomly.
Pair Corralation between BP Plc and Kinnevik Investment
Assuming the 90 days trading horizon BP plc is expected to under-perform the Kinnevik Investment. But the stock apears to be less risky and, when comparing its historical volatility, BP plc is 1.32 times less risky than Kinnevik Investment. The stock trades about -0.19 of its potential returns per unit of risk. The Kinnevik Investment AB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,566 in Kinnevik Investment AB on September 5, 2024 and sell it today you would earn a total of 129.00 from holding Kinnevik Investment AB or generate 1.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
BP plc vs. Kinnevik Investment AB
Performance |
| Timeline |
| BP plc |
| Kinnevik Investment |
BP Plc and Kinnevik Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plc and Kinnevik Investment
The main advantage of trading using opposite BP Plc and Kinnevik Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc position performs unexpectedly, Kinnevik Investment 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 Kinnevik Investment will offset losses from the drop in Kinnevik Investment's long position.| BP Plc vs. Kinnevik Investment AB | BP Plc vs. Southwest Airlines Co | BP Plc vs. British American Tobacco | BP Plc vs. Smithson Investment Trust |
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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 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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