Correlation Between Stepstone and BP PLC
Can any of the company-specific risk be diversified away by investing in both Stepstone 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 Stepstone and BP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and BP PLC ADR, you can compare the effects of market volatilities on Stepstone 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 Stepstone with a short position of BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and BP PLC.
Diversification Opportunities for Stepstone and BP PLC
Pay attention - limited upside
The 3 months correlation between Stepstone and BP PLC is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and BP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC ADR and Stepstone 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 Stepstone Group 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 ADR has no effect on the direction of Stepstone i.e., Stepstone and BP PLC go up and down completely randomly.
Pair Corralation between Stepstone and BP PLC
Given the investment horizon of 90 days Stepstone Group is expected to generate 1.41 times more return on investment than BP PLC. However, Stepstone is 1.41 times more volatile than BP PLC ADR. It trades about 0.16 of its potential returns per unit of risk. BP PLC ADR is currently generating about -0.09 per unit of risk. If you would invest 5,379 in Stepstone Group on September 2, 2024 and sell it today you would earn a total of 1,210 from holding Stepstone Group or generate 22.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. BP PLC ADR
Performance |
| Timeline |
| Stepstone Group |
| BP PLC ADR |
Stepstone and BP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and BP PLC
The main advantage of trading using opposite Stepstone and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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