Correlation Between Technology Minerals and BP Plc
Can any of the company-specific risk be diversified away by investing in both Technology Minerals 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 Technology Minerals and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Minerals PLC and BP plc, you can compare the effects of market volatilities on Technology Minerals 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 Technology Minerals with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Minerals and BP Plc.
Diversification Opportunities for Technology Minerals and BP Plc
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Technology and BP-A is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Technology Minerals PLC and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Technology Minerals 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 Technology Minerals PLC 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 Technology Minerals i.e., Technology Minerals and BP Plc go up and down completely randomly.
Pair Corralation between Technology Minerals and BP Plc
Assuming the 90 days trading horizon Technology Minerals PLC is expected to under-perform the BP Plc. In addition to that, Technology Minerals is 7.29 times more volatile than BP plc. It trades about -0.01 of its total potential returns per unit of risk. BP plc is currently generating about -0.03 per unit of volatility. If you would invest 16,232 in BP plc on November 2, 2024 and sell it today you would lose (3,132) from holding BP plc or give up 19.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.99% |
| Values | Daily Returns |
Technology Minerals PLC vs. BP plc
Performance |
| Timeline |
| Technology Minerals PLC |
| BP plc |
Technology Minerals and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Minerals and BP Plc
The main advantage of trading using opposite Technology Minerals and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Minerals 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.| Technology Minerals vs. Givaudan SA | Technology Minerals vs. Antofagasta PLC | Technology Minerals vs. Ferrexpo PLC | Technology Minerals vs. Atalaya Mining |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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