Correlation Between Target Healthcare and BP PLC
Can any of the company-specific risk be diversified away by investing in both Target Healthcare 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 Target Healthcare and BP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Healthcare REIT and BP PLC ADR, you can compare the effects of market volatilities on Target Healthcare 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 Target Healthcare with a short position of BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Healthcare and BP PLC.
Diversification Opportunities for Target Healthcare and BP PLC
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Target and 0HKP is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Target Healthcare REIT 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 Target Healthcare 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 Target Healthcare REIT 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 Target Healthcare i.e., Target Healthcare and BP PLC go up and down completely randomly.
Pair Corralation between Target Healthcare and BP PLC
Assuming the 90 days trading horizon Target Healthcare REIT is expected to generate 1.06 times more return on investment than BP PLC. However, Target Healthcare is 1.06 times more volatile than BP PLC ADR. It trades about 0.03 of its potential returns per unit of risk. BP PLC ADR is currently generating about -0.04 per unit of risk. If you would invest 7,726 in Target Healthcare REIT on September 4, 2024 and sell it today you would earn a total of 734.00 from holding Target Healthcare REIT or generate 9.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Target Healthcare REIT vs. BP PLC ADR
Performance |
| Timeline |
| Target Healthcare REIT |
| BP PLC ADR |
Target Healthcare and BP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Healthcare and BP PLC
The main advantage of trading using opposite Target Healthcare and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Healthcare 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.| Target Healthcare vs. Hammerson PLC | Target Healthcare vs. Workspace Group PLC | Target Healthcare vs. Supermarket Income REIT | Target Healthcare vs. Reckitt Benckiser Group |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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