Correlation Between BP Prudhoe and Exxon
Can any of the company-specific risk be diversified away by investing in both BP Prudhoe and Exxon 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 Prudhoe and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP Prudhoe Bay and Exxon Mobil Corp, you can compare the effects of market volatilities on BP Prudhoe and Exxon 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 Prudhoe with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Prudhoe and Exxon.
Diversification Opportunities for BP Prudhoe and Exxon
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BPT and Exxon is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding BP Prudhoe Bay and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and BP Prudhoe 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 Prudhoe Bay are associated (or correlated) with Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of BP Prudhoe i.e., BP Prudhoe and Exxon go up and down completely randomly.
Pair Corralation between BP Prudhoe and Exxon
Considering the 90-day investment horizon BP Prudhoe Bay is expected to generate 4.83 times more return on investment than Exxon. However, BP Prudhoe is 4.83 times more volatile than Exxon Mobil Corp. It trades about 0.26 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about -0.09 per unit of risk. If you would invest 46.00 in BP Prudhoe Bay on November 18, 2024 and sell it today you would earn a total of 18.00 from holding BP Prudhoe Bay or generate 39.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP Prudhoe Bay vs. Exxon Mobil Corp
Performance |
| Timeline |
| BP Prudhoe Bay |
| Exxon Mobil Corp |
BP Prudhoe and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Prudhoe and Exxon
The main advantage of trading using opposite BP Prudhoe and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Prudhoe position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.| BP Prudhoe vs. Viper Energy Ut | BP Prudhoe vs. FLEX LNG | BP Prudhoe vs. Hess Midstream Partners | BP Prudhoe vs. Frontline |
| Exxon vs. TotalEnergies SE ADR | Exxon vs. Equinor ASA ADR | Exxon vs. Petrleo Brasileiro SA | Exxon vs. Ecopetrol SA ADR |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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