Correlation Between Industrial and BP Plc

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Industrial 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 Industrial and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial and Commercial and BP plc, you can compare the effects of market volatilities on Industrial 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 Industrial with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and BP Plc.

Diversification Opportunities for Industrial and BP Plc

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between Industrial and BSU is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and BP Plc go up and down completely randomly.

Pair Corralation between Industrial and BP Plc

Assuming the 90 days horizon Industrial and Commercial is expected to generate 1.86 times more return on investment than BP Plc. However, Industrial is 1.86 times more volatile than BP plc. It trades about 0.02 of its potential returns per unit of risk. BP plc is currently generating about -0.01 per unit of risk. If you would invest  53.00  in Industrial and Commercial on September 1, 2024 and sell it today you would earn a total of  2.00  from holding Industrial and Commercial or generate 3.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.74%
ValuesDaily Returns

Industrial and Commercial  vs.  BP plc

 Performance 
       Timeline  
Industrial and Commercial 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in December 2024.
BP plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BP plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Industrial and BP Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Industrial and BP Plc

The main advantage of trading using opposite Industrial and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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.
The idea behind Industrial and Commercial and BP plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

Other Complementary Tools

Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets
Portfolio File Import
Quickly import all of your third-party portfolios from your local drive in csv format
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
ETFs
Find actively traded Exchange Traded Funds (ETF) from around the world
Portfolio Comparator
Compare the composition, asset allocations and performance of any two portfolios in your account