Correlation Between BP Plc and Anglesey Mining
Can any of the company-specific risk be diversified away by investing in both BP Plc and Anglesey 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 Anglesey 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 Anglesey Mining, you can compare the effects of market volatilities on BP Plc and Anglesey 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 Anglesey Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and Anglesey Mining.
Diversification Opportunities for BP Plc and Anglesey Mining
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BP-A and Anglesey is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and Anglesey Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglesey Mining 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 Anglesey Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglesey Mining has no effect on the direction of BP Plc i.e., BP Plc and Anglesey Mining go up and down completely randomly.
Pair Corralation between BP Plc and Anglesey Mining
Assuming the 90 days trading horizon BP plc is expected to generate 0.35 times more return on investment than Anglesey Mining. However, BP plc is 2.85 times less risky than Anglesey Mining. It trades about -0.01 of its potential returns per unit of risk. Anglesey Mining is currently generating about -0.02 per unit of risk. If you would invest 15,387 in BP plc on August 31, 2024 and sell it today you would lose (1,437) from holding BP plc or give up 9.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.62% |
| Values | Daily Returns |
BP plc vs. Anglesey Mining
Performance |
| Timeline |
| BP plc |
| Anglesey Mining |
BP Plc and Anglesey Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plc and Anglesey Mining
The main advantage of trading using opposite BP Plc and Anglesey Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc position performs unexpectedly, Anglesey 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 Anglesey Mining will offset losses from the drop in Anglesey Mining's long position.| BP Plc vs. Eastinco Mining Exploration | BP Plc vs. International Biotechnology Trust | BP Plc vs. Vulcan Materials Co | BP Plc vs. Morgan Advanced Materials |
| Anglesey Mining vs. European Metals Holdings | Anglesey Mining vs. Jacquet Metal Service | Anglesey Mining vs. Silvercorp Metals | Anglesey Mining vs. Future Metals NL |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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