Correlation Between BP Plc and Eastinco Mining
Can any of the company-specific risk be diversified away by investing in both BP Plc and Eastinco Mining 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 Eastinco Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP plc and Eastinco Mining Exploration, you can compare the effects of market volatilities on BP Plc and Eastinco Mining 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 Eastinco Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and Eastinco Mining.
Diversification Opportunities for BP Plc and Eastinco Mining
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BP-A and Eastinco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and Eastinco Mining Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastinco Mining Expl 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 Eastinco Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastinco Mining Expl has no effect on the direction of BP Plc i.e., BP Plc and Eastinco Mining go up and down completely randomly.
Pair Corralation between BP Plc and Eastinco Mining
Assuming the 90 days trading horizon BP Plc is expected to generate 3114.05 times less return on investment than Eastinco Mining. But when comparing it to its historical volatility, BP plc is 200.02 times less risky than Eastinco Mining. It trades about 0.02 of its potential returns per unit of risk. Eastinco Mining Exploration is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 0.85 in Eastinco Mining Exploration on September 2, 2024 and sell it today you would earn a total of 5,099 from holding Eastinco Mining Exploration or generate 599900.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.79% |
| Values | Daily Returns |
BP plc vs. Eastinco Mining Exploration
Performance |
| Timeline |
| BP plc |
| Eastinco Mining Expl |
BP Plc and Eastinco Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plc and Eastinco Mining
The main advantage of trading using opposite BP Plc and Eastinco Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc position performs unexpectedly, Eastinco Mining 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 Eastinco Mining will offset losses from the drop in Eastinco Mining's 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 |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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