Correlation Between Valero Energy and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both Valero Energy and BP Prudhoe 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 Valero Energy and BP Prudhoe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and BP Prudhoe Bay, you can compare the effects of market volatilities on Valero Energy and BP Prudhoe 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 Valero Energy with a short position of BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and BP Prudhoe.
Diversification Opportunities for Valero Energy and BP Prudhoe
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Valero and BMI is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and BP Prudhoe Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Prudhoe Bay and Valero Energy 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 Valero Energy are associated (or correlated) with BP Prudhoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Prudhoe Bay has no effect on the direction of Valero Energy i.e., Valero Energy and BP Prudhoe go up and down completely randomly.
Pair Corralation between Valero Energy and BP Prudhoe
Assuming the 90 days horizon Valero Energy is expected to generate 0.38 times more return on investment than BP Prudhoe. However, Valero Energy is 2.65 times less risky than BP Prudhoe. It trades about 0.01 of its potential returns per unit of risk. BP Prudhoe Bay is currently generating about -0.1 per unit of risk. If you would invest 11,179 in Valero Energy on September 24, 2024 and sell it today you would earn a total of 221.00 from holding Valero Energy or generate 1.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valero Energy vs. BP Prudhoe Bay
Performance |
| Timeline |
| Valero Energy |
| BP Prudhoe Bay |
Valero Energy and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valero Energy and BP Prudhoe
The main advantage of trading using opposite Valero Energy and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy position performs unexpectedly, BP Prudhoe 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 Prudhoe will offset losses from the drop in BP Prudhoe's long position.| Valero Energy vs. Reliance Industries Limited | Valero Energy vs. Marathon Petroleum Corp | Valero Energy vs. NESTE OYJ UNSPADR | Valero Energy vs. Polski Koncern Naftowy |
| BP Prudhoe vs. Reliance Industries Limited | BP Prudhoe vs. Marathon Petroleum Corp | BP Prudhoe vs. Valero Energy | BP Prudhoe vs. NESTE OYJ UNSPADR |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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