Correlation Between BP PLC and NACCO Industries
Can any of the company-specific risk be diversified away by investing in both BP PLC and NACCO Industries 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 NACCO Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP PLC ADR and NACCO Industries, you can compare the effects of market volatilities on BP PLC and NACCO Industries 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 NACCO Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and NACCO Industries.
Diversification Opportunities for BP PLC and NACCO Industries
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BP PLC and NACCO is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC ADR and NACCO Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NACCO Industries 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 ADR are associated (or correlated) with NACCO Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NACCO Industries has no effect on the direction of BP PLC i.e., BP PLC and NACCO Industries go up and down completely randomly.
Pair Corralation between BP PLC and NACCO Industries
Allowing for the 90-day total investment horizon BP PLC ADR is expected to generate 0.58 times more return on investment than NACCO Industries. However, BP PLC ADR is 1.73 times less risky than NACCO Industries. It trades about 0.0 of its potential returns per unit of risk. NACCO Industries is currently generating about -0.01 per unit of risk. If you would invest 3,170 in BP PLC ADR on August 24, 2024 and sell it today you would lose (198.00) from holding BP PLC ADR or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP PLC ADR vs. NACCO Industries
Performance |
| Timeline |
| BP PLC ADR |
| NACCO Industries |
BP PLC and NACCO Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP PLC and NACCO Industries
The main advantage of trading using opposite BP PLC and NACCO Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC position performs unexpectedly, NACCO Industries 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 NACCO Industries will offset losses from the drop in NACCO Industries' long position.| BP PLC vs. Eshallgo Class A | BP PLC vs. Amtech Systems | BP PLC vs. Gold Fields Ltd | BP PLC vs. Aegean Airlines SA |
| NACCO Industries vs. Alliance Resource Partners | NACCO Industries vs. Hallador Energy | NACCO Industries vs. Consol Energy | NACCO Industries vs. Indo Tambangraya Megah |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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