Correlation Between BP PLC and Tetra Technologies
Can any of the company-specific risk be diversified away by investing in both BP PLC and Tetra Technologies 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 Tetra Technologies 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 Tetra Technologies, you can compare the effects of market volatilities on BP PLC and Tetra Technologies 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 Tetra Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and Tetra Technologies.
Diversification Opportunities for BP PLC and Tetra Technologies
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BP PLC and Tetra is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC ADR and Tetra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tetra Technologies 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 Tetra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tetra Technologies has no effect on the direction of BP PLC i.e., BP PLC and Tetra Technologies go up and down completely randomly.
Pair Corralation between BP PLC and Tetra Technologies
Allowing for the 90-day total investment horizon BP PLC ADR is expected to under-perform the Tetra Technologies. But the stock apears to be less risky and, when comparing its historical volatility, BP PLC ADR is 3.48 times less risky than Tetra Technologies. The stock trades about -0.07 of its potential returns per unit of risk. The Tetra Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 317.00 in Tetra Technologies on August 27, 2024 and sell it today you would earn a total of 79.00 from holding Tetra Technologies or generate 24.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP PLC ADR vs. Tetra Technologies
Performance |
| Timeline |
| BP PLC ADR |
| Tetra Technologies |
BP PLC and Tetra Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP PLC and Tetra Technologies
The main advantage of trading using opposite BP PLC and Tetra Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC position performs unexpectedly, Tetra Technologies 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 Tetra Technologies will offset losses from the drop in Tetra Technologies' long position.| BP PLC vs. TotalEnergies SE ADR | BP PLC vs. Chevron Corp | BP PLC vs. Exxon Mobil Corp | BP PLC vs. Equinor ASA ADR |
| Tetra Technologies vs. ProPetro Holding Corp | Tetra Technologies vs. RPC Inc | Tetra Technologies vs. MRC Global | Tetra Technologies vs. Expro Group Holdings |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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