Correlation Between Neste Oyj and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both Neste Oyj 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 Neste Oyj and BP Prudhoe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neste Oyj and BP Prudhoe Bay, you can compare the effects of market volatilities on Neste Oyj 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 Neste Oyj with a short position of BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neste Oyj and BP Prudhoe.
Diversification Opportunities for Neste Oyj and BP Prudhoe
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Neste and BMI is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Neste Oyj 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 Neste Oyj 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 Neste Oyj 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 Neste Oyj i.e., Neste Oyj and BP Prudhoe go up and down completely randomly.
Pair Corralation between Neste Oyj and BP Prudhoe
Assuming the 90 days horizon Neste Oyj is expected to generate 0.49 times more return on investment than BP Prudhoe. However, Neste Oyj is 2.06 times less risky than BP Prudhoe. It trades about -0.12 of its potential returns per unit of risk. BP Prudhoe Bay is currently generating about -0.1 per unit of risk. If you would invest 3,031 in Neste Oyj on September 24, 2024 and sell it today you would lose (1,913) from holding Neste Oyj or give up 63.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Neste Oyj vs. BP Prudhoe Bay
Performance |
| Timeline |
| Neste Oyj |
| BP Prudhoe Bay |
Neste Oyj and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Neste Oyj and BP Prudhoe
The main advantage of trading using opposite Neste Oyj and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neste Oyj 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.| Neste Oyj vs. Reliance Industries Limited | Neste Oyj vs. Marathon Petroleum Corp | Neste Oyj vs. Valero Energy | Neste Oyj vs. NESTE OYJ UNSPADR |
| BP Prudhoe vs. Reliance Industries Limited | BP Prudhoe vs. Marathon Petroleum Corp | BP Prudhoe vs. Valero Energy | BP Prudhoe vs. NESTE OYJ UNSPADR |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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