Correlation Between Leroy Seafood and BP Plc

Can any of the company-specific risk be diversified away by investing in both Leroy Seafood 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 Leroy Seafood and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leroy Seafood Group and BP plc, you can compare the effects of market volatilities on Leroy Seafood 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 Leroy Seafood with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leroy Seafood and BP Plc.

Diversification Opportunities for Leroy Seafood and BP Plc

0.23

Correlation Coefficient

Leroy Seafood  BP Plc

Modest diversification

The 3 months correlation between Leroy and BP-A is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Leroy Seafood Group and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Leroy Seafood 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 Leroy Seafood 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 has no effect on the direction of Leroy Seafood i.e., Leroy Seafood and BP Plc go up and down completely randomly.

Pair Corralation between Leroy Seafood and BP Plc

Assuming the 90 days trading horizon Leroy Seafood Group is expected to generate 1.4 times more return on investment than BP Plc. However, Leroy Seafood is 1.4 times more volatile than BP plc. It trades about 0.02 of its potential returns per unit of risk. BP plc is currently generating about -0.02 per unit of risk. If you would invest  5,082  in Leroy Seafood Group on October 26, 2024 and sell it today you would earn a total of  338.00  from holding Leroy Seafood Group or generate 6.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.19%
Values	Daily Returns

Leroy Seafood Group  vs.  BP plc

Leroy Seafood Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Leroy Seafood Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Leroy Seafood is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

BP plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BP plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Leroy Seafood and BP Plc

The main advantage of trading using opposite Leroy Seafood and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leroy Seafood 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.

The idea behind Leroy Seafood Group and BP plc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.