Correlation Between BP PLC and GoldMining
Can any of the company-specific risk be diversified away by investing in both BP PLC and GoldMining 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 GoldMining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP PLC and GoldMining, you can compare the effects of market volatilities on BP PLC and GoldMining 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 GoldMining. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and GoldMining.
Diversification Opportunities for BP PLC and GoldMining
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BP PLC and GoldMining is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of BP PLC i.e., BP PLC and GoldMining go up and down completely randomly.
Pair Corralation between BP PLC and GoldMining
Assuming the 90 days trading horizon BP PLC is expected to under-perform the GoldMining. But the stock apears to be less risky and, when comparing its historical volatility, BP PLC is 1.93 times less risky than GoldMining. The stock trades about -0.07 of its potential returns per unit of risk. The GoldMining is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 119.00 in GoldMining on September 3, 2024 and sell it today you would earn a total of 1.00 from holding GoldMining or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 69.23% |
| Values | Daily Returns |
BP PLC vs. GoldMining
Performance |
| Timeline |
| BP PLC |
| GoldMining |
BP PLC and GoldMining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP PLC and GoldMining
The main advantage of trading using opposite BP PLC and GoldMining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC position performs unexpectedly, GoldMining 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 GoldMining will offset losses from the drop in GoldMining's long position.| BP PLC vs. GoldMining | BP PLC vs. Panther Metals PLC | BP PLC vs. Qurate Retail Series | BP PLC vs. AMG Advanced Metallurgical |
| GoldMining vs. Catalyst Media Group | GoldMining vs. CATLIN GROUP | GoldMining vs. Magnora ASA | GoldMining vs. RTW Venture Fund |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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