Correlation Between Japan Medical and BP Plc
Can any of the company-specific risk be diversified away by investing in both Japan Medical 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 Japan Medical and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Medical Dynamic and BP plc, you can compare the effects of market volatilities on Japan Medical 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 Japan Medical with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Medical and BP Plc.
Diversification Opportunities for Japan Medical and BP Plc
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Japan and BSU is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Japan Medical Dynamic and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Japan Medical 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 Japan Medical Dynamic 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 Japan Medical i.e., Japan Medical and BP Plc go up and down completely randomly.
Pair Corralation between Japan Medical and BP Plc
Assuming the 90 days horizon Japan Medical is expected to generate 27.13 times less return on investment than BP Plc. But when comparing it to its historical volatility, Japan Medical Dynamic is 1.07 times less risky than BP Plc. It trades about 0.01 of its potential returns per unit of risk. BP plc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,980 in BP plc on November 27, 2024 and sell it today you would earn a total of 240.00 from holding BP plc or generate 8.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Medical Dynamic vs. BP plc
Performance |
| Timeline |
| Japan Medical Dynamic |
| BP plc |
Japan Medical and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Medical and BP Plc
The main advantage of trading using opposite Japan Medical and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Medical 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.| Japan Medical vs. Playtech plc | Japan Medical vs. ANTA Sports Products | Japan Medical vs. Cairo Communication SpA | Japan Medical vs. Spirent Communications plc |
| BP Plc vs. EBRO FOODS | BP Plc vs. Cars Inc | BP Plc vs. Grupo Carso SAB | BP Plc vs. Commercial Vehicle Group |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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