Correlation Between Strat Petroleum and BPI Energy
Can any of the company-specific risk be diversified away by investing in both Strat Petroleum and BPI Energy 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 Strat Petroleum and BPI Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strat Petroleum and BPI Energy Holdings, you can compare the effects of market volatilities on Strat Petroleum and BPI Energy 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 Strat Petroleum with a short position of BPI Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strat Petroleum and BPI Energy.
Diversification Opportunities for Strat Petroleum and BPI Energy
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Strat and BPI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Strat Petroleum and BPI Energy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BPI Energy Holdings and Strat Petroleum 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 Strat Petroleum are associated (or correlated) with BPI Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BPI Energy Holdings has no effect on the direction of Strat Petroleum i.e., Strat Petroleum and BPI Energy go up and down completely randomly.
Pair Corralation between Strat Petroleum and BPI Energy
If you would invest 0.01 in BPI Energy Holdings on August 24, 2024 and sell it today you would earn a total of 0.00 from holding BPI Energy Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.4% |
| Values | Daily Returns |
Strat Petroleum vs. BPI Energy Holdings
Performance |
| Timeline |
| Strat Petroleum |
| BPI Energy Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Strat Petroleum and BPI Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strat Petroleum and BPI Energy
The main advantage of trading using opposite Strat Petroleum and BPI Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strat Petroleum position performs unexpectedly, BPI Energy 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 BPI Energy will offset losses from the drop in BPI Energy's long position.The idea behind Strat Petroleum and BPI Energy Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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