Correlation Between Somero Enterprise and BP Plc
Can any of the company-specific risk be diversified away by investing in both Somero Enterprise 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 Somero Enterprise and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Somero Enterprise and BP plc, you can compare the effects of market volatilities on Somero Enterprise 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 Somero Enterprise with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Somero Enterprise and BP Plc.
Diversification Opportunities for Somero Enterprise and BP Plc
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Somero and BP-A is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Somero Enterprise and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Somero Enterprise 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 Somero Enterprise 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 Somero Enterprise i.e., Somero Enterprise and BP Plc go up and down completely randomly.
Pair Corralation between Somero Enterprise and BP Plc
Assuming the 90 days trading horizon Somero Enterprise is expected to generate 1.64 times more return on investment than BP Plc. However, Somero Enterprise is 1.64 times more volatile than BP plc. It trades about -0.01 of its potential returns per unit of risk. BP plc is currently generating about -0.03 per unit of risk. If you would invest 34,371 in Somero Enterprise on November 2, 2024 and sell it today you would lose (5,771) from holding Somero Enterprise or give up 16.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.99% |
| Values | Daily Returns |
Somero Enterprise vs. BP plc
Performance |
| Timeline |
| Somero Enterprise |
| BP plc |
Somero Enterprise and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Somero Enterprise and BP Plc
The main advantage of trading using opposite Somero Enterprise and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Somero Enterprise 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.| Somero Enterprise vs. Atalaya Mining | Somero Enterprise vs. European Metals Holdings | Somero Enterprise vs. Wheaton Precious Metals | Somero Enterprise vs. Melia Hotels |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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