Correlation Between Cornish Metals and BP Plc
Can any of the company-specific risk be diversified away by investing in both Cornish Metals and BP Plc 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 Cornish Metals and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cornish Metals and BP plc, you can compare the effects of market volatilities on Cornish Metals and BP Plc 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 Cornish Metals with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cornish Metals and BP Plc.
Diversification Opportunities for Cornish Metals and BP Plc
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cornish and BP-A is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cornish Metals and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Cornish Metals 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 Cornish Metals are associated (or correlated) with BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Cornish Metals i.e., Cornish Metals and BP Plc go up and down completely randomly.
Pair Corralation between Cornish Metals and BP Plc
Assuming the 90 days trading horizon Cornish Metals is expected to generate about the same return on investment as BP plc. However, Cornish Metals is 2.83 times more volatile than BP plc. It trades about -0.01 of its potential returns per unit of risk. BP plc is currently producing about -0.03 per unit of risk. If you would invest 16,232 in BP plc on November 2, 2024 and sell it today you would lose (3,132) from holding BP plc or give up 19.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.99% |
| Values | Daily Returns |
Cornish Metals vs. BP plc
Performance |
| Timeline |
| Cornish Metals |
| BP plc |
Cornish Metals and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cornish Metals and BP Plc
The main advantage of trading using opposite Cornish Metals and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cornish Metals position performs unexpectedly, BP Plc 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 Plc will offset losses from the drop in BP Plc's long position.| Cornish Metals vs. European Metals Holdings | Cornish Metals vs. Central Asia Metals | Cornish Metals vs. Golden Metal Resources | Cornish Metals vs. Naked Wines plc |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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