Correlation Between Cross Timbers and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both Cross Timbers and BP Prudhoe 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 Cross Timbers and BP Prudhoe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cross Timbers Royalty and BP Prudhoe Bay, you can compare the effects of market volatilities on Cross Timbers and BP Prudhoe 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 Cross Timbers with a short position of BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cross Timbers and BP Prudhoe.
Diversification Opportunities for Cross Timbers and BP Prudhoe
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cross and BPT is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cross Timbers Royalty and BP Prudhoe Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Prudhoe Bay and Cross Timbers 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 Cross Timbers Royalty are associated (or correlated) with BP Prudhoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Prudhoe Bay has no effect on the direction of Cross Timbers i.e., Cross Timbers and BP Prudhoe go up and down completely randomly.
Pair Corralation between Cross Timbers and BP Prudhoe
Considering the 90-day investment horizon Cross Timbers Royalty is expected to generate 0.69 times more return on investment than BP Prudhoe. However, Cross Timbers Royalty is 1.46 times less risky than BP Prudhoe. It trades about -0.02 of its potential returns per unit of risk. BP Prudhoe Bay is currently generating about -0.08 per unit of risk. If you would invest 1,929 in Cross Timbers Royalty on September 2, 2024 and sell it today you would lose (835.00) from holding Cross Timbers Royalty or give up 43.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cross Timbers Royalty vs. BP Prudhoe Bay
Performance |
| Timeline |
| Cross Timbers Royalty |
| BP Prudhoe Bay |
Cross Timbers and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cross Timbers and BP Prudhoe
The main advantage of trading using opposite Cross Timbers and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cross Timbers position performs unexpectedly, BP Prudhoe 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 Prudhoe will offset losses from the drop in BP Prudhoe's long position.| Cross Timbers vs. Sabine Royalty Trust | Cross Timbers vs. Mesa Royalty Trust | Cross Timbers vs. San Juan Basin | Cross Timbers vs. Permian Basin Royalty |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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