Correlation Between BP PLC and BP Plc
Can any of the company-specific risk be diversified away by investing in both BP PLC and BP Plc 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 BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP PLC DZ1 and BP plc, you can compare the effects of market volatilities on BP PLC and BP Plc 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 BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and BP Plc.
Diversification Opportunities for BP PLC and BP Plc
Very poor diversification
The 3 months correlation between BPE and BSU is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC DZ1 and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 DZ1 are associated (or correlated) with BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of BP PLC i.e., BP PLC and BP Plc go up and down completely randomly.
Pair Corralation between BP PLC and BP Plc
Assuming the 90 days horizon BP PLC is expected to generate 2.3 times less return on investment than BP Plc. In addition to that, BP PLC is 2.41 times more volatile than BP plc. It trades about 0.04 of its total potential returns per unit of risk. BP plc is currently generating about 0.2 per unit of volatility. If you would invest 2,614 in BP plc on September 1, 2024 and sell it today you would earn a total of 126.00 from holding BP plc or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
BP PLC DZ1 vs. BP plc
Performance |
| Timeline |
| BP PLC DZ1 |
| BP plc |
BP PLC and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP PLC and BP Plc
The main advantage of trading using opposite BP PLC and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.The idea behind BP PLC DZ1 and BP plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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