Correlation Between BPI Energy and Foothills Exploration
Can any of the company-specific risk be diversified away by investing in both BPI Energy and Foothills Exploration 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 BPI Energy and Foothills Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BPI Energy Holdings and Foothills Exploration, you can compare the effects of market volatilities on BPI Energy and Foothills Exploration 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 BPI Energy with a short position of Foothills Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of BPI Energy and Foothills Exploration.
Diversification Opportunities for BPI Energy and Foothills Exploration
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BPI and Foothills is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding BPI Energy Holdings and Foothills Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foothills Exploration and BPI Energy 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 BPI Energy Holdings are associated (or correlated) with Foothills Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foothills Exploration has no effect on the direction of BPI Energy i.e., BPI Energy and Foothills Exploration go up and down completely randomly.
Pair Corralation between BPI Energy and Foothills Exploration
If you would invest 0.01 in Foothills Exploration on September 14, 2024 and sell it today you would lose (0.01) from holding Foothills Exploration or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 0.37% |
| Values | Daily Returns |
BPI Energy Holdings vs. Foothills Exploration
Performance |
| Timeline |
| BPI Energy Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Foothills Exploration |
BPI Energy and Foothills Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BPI Energy and Foothills Exploration
The main advantage of trading using opposite BPI Energy and Foothills Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BPI Energy position performs unexpectedly, Foothills Exploration 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 Foothills Exploration will offset losses from the drop in Foothills Exploration's long position.The idea behind BPI Energy Holdings and Foothills Exploration 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.| Foothills Exploration vs. Permian Resources | Foothills Exploration vs. Devon Energy | Foothills Exploration vs. EOG Resources | Foothills Exploration vs. Coterra Energy |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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