Correlation Between Gold Fields and BP PLC
Can any of the company-specific risk be diversified away by investing in both Gold Fields 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 Gold Fields and BP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Ltd and BP PLC ADR, you can compare the effects of market volatilities on Gold Fields 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 Gold Fields with a short position of BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and BP PLC.
Diversification Opportunities for Gold Fields and BP PLC
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gold and BP PLC is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and BP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC ADR and Gold Fields 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 Gold Fields Ltd 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 ADR has no effect on the direction of Gold Fields i.e., Gold Fields and BP PLC go up and down completely randomly.
Pair Corralation between Gold Fields and BP PLC
Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 1.74 times more return on investment than BP PLC. However, Gold Fields is 1.74 times more volatile than BP PLC ADR. It trades about 0.05 of its potential returns per unit of risk. BP PLC ADR is currently generating about -0.13 per unit of risk. If you would invest 1,389 in Gold Fields Ltd on August 28, 2024 and sell it today you would earn a total of 84.00 from holding Gold Fields Ltd or generate 6.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. BP PLC ADR
Performance |
| Timeline |
| Gold Fields |
| BP PLC ADR |
Gold Fields and BP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and BP PLC
The main advantage of trading using opposite Gold Fields and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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.| Gold Fields vs. Agnico Eagle Mines | Gold Fields vs. Kinross Gold | Gold Fields vs. Harmony Gold Mining | Gold Fields vs. Franco Nevada |
| BP PLC vs. TotalEnergies SE ADR | BP PLC vs. Chevron Corp | BP PLC vs. Exxon Mobil Corp | BP PLC vs. Equinor ASA 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 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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