Correlation Between BP Plc and Retail Estates
Can any of the company-specific risk be diversified away by investing in both BP Plc and Retail Estates 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 Retail Estates into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP plc and Retail Estates NV, you can compare the effects of market volatilities on BP Plc and Retail Estates 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 Retail Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and Retail Estates.
Diversification Opportunities for BP Plc and Retail Estates
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BSU and Retail is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV 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 Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of BP Plc i.e., BP Plc and Retail Estates go up and down completely randomly.
Pair Corralation between BP Plc and Retail Estates
Assuming the 90 days horizon BP plc is expected to generate 1.54 times more return on investment than Retail Estates. However, BP Plc is 1.54 times more volatile than Retail Estates NV. It trades about 0.14 of its potential returns per unit of risk. Retail Estates NV is currently generating about -0.22 per unit of risk. 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP plc vs. Retail Estates NV
Performance |
| Timeline |
| BP plc |
| Retail Estates NV |
BP Plc and Retail Estates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP Plc and Retail Estates
The main advantage of trading using opposite BP Plc and Retail Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc position performs unexpectedly, Retail Estates 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 Retail Estates will offset losses from the drop in Retail Estates' long position.| BP Plc vs. Siamgas And Petrochemicals | BP Plc vs. Granite Construction | BP Plc vs. Performance Food Group | BP Plc vs. NIPPON MEAT PACKERS |
| Retail Estates vs. Superior Plus Corp | Retail Estates vs. NMI Holdings | Retail Estates vs. Origin Agritech | Retail Estates vs. SIVERS SEMICONDUCTORS AB |
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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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