Correlation Between BP Plc and Chevron
Can any of the company-specific risk be diversified away by investing in both BP Plc and Chevron 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 Chevron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP plc and Chevron, you can compare the effects of market volatilities on BP Plc and Chevron 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 Chevron. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and Chevron.
Diversification Opportunities for BP Plc and Chevron
Very good diversification
The 3 months correlation between BPE5 and Chevron is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron 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 Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of BP Plc i.e., BP Plc and Chevron go up and down completely randomly.
Pair Corralation between BP Plc and Chevron
Assuming the 90 days trading horizon BP plc is expected to under-perform the Chevron. In addition to that, BP Plc is 1.08 times more volatile than Chevron. It trades about 0.0 of its total potential returns per unit of risk. Chevron is currently generating about 0.01 per unit of volatility. If you would invest 14,938 in Chevron on September 3, 2024 and sell it today you would earn a total of 362.00 from holding Chevron or generate 2.42% 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 vs. Chevron
Performance |
| Timeline |
| BP plc |
| Chevron |
BP Plc and Chevron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plc and Chevron
The main advantage of trading using opposite BP Plc and Chevron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc position performs unexpectedly, Chevron 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 Chevron will offset losses from the drop in Chevron's long position.| BP Plc vs. BANKINTER ADR 2007 | BP Plc vs. VIVA WINE GROUP | BP Plc vs. Micron Technology | BP Plc vs. Casio Computer CoLtd |
| Chevron vs. BII Railway Transportation | Chevron vs. SWISS WATER DECAFFCOFFEE | Chevron vs. Broadcom | Chevron vs. BROADSTNET LEADL 00025 |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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