Correlation Between BP PLC and Cactus
Can any of the company-specific risk be diversified away by investing in both BP PLC and Cactus 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 Cactus 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 Cactus Inc, you can compare the effects of market volatilities on BP PLC and Cactus 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 Cactus. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and Cactus.
Diversification Opportunities for BP PLC and Cactus
Very good diversification
The 3 months correlation between BP PLC and Cactus is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC ADR and Cactus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cactus Inc 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 Cactus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cactus Inc has no effect on the direction of BP PLC i.e., BP PLC and Cactus go up and down completely randomly.
Pair Corralation between BP PLC and Cactus
Allowing for the 90-day total investment horizon BP PLC ADR is expected to under-perform the Cactus. But the stock apears to be less risky and, when comparing its historical volatility, BP PLC ADR is 1.81 times less risky than Cactus. The stock trades about -0.07 of its potential returns per unit of risk. The Cactus Inc is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 5,759 in Cactus Inc on August 27, 2024 and sell it today you would earn a total of 1,140 from holding Cactus Inc or generate 19.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP PLC ADR vs. Cactus Inc
Performance |
| Timeline |
| BP PLC ADR |
| Cactus Inc |
BP PLC and Cactus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP PLC and Cactus
The main advantage of trading using opposite BP PLC and Cactus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC position performs unexpectedly, Cactus 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 Cactus will offset losses from the drop in Cactus' 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 |
| Cactus vs. ChampionX | Cactus vs. Expro Group Holdings | Cactus vs. Ranger Energy Services | Cactus vs. MRC Global |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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