Correlation Between SOGECLAIR and BP PLC

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

By analyzing existing cross correlation between SOGECLAIR SA INH and BP PLC DZ1, you can compare the effects of market volatilities on SOGECLAIR 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 SOGECLAIR with a short position of BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOGECLAIR and BP PLC.

Diversification Opportunities for SOGECLAIR and BP PLC

0.03

Correlation Coefficient

SOGECLAIR  BP PLC

Significant diversification

The 3 months correlation between SOGECLAIR and BPE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding SOGECLAIR SA INH and BP PLC DZ1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC DZ1 and SOGECLAIR 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 SOGECLAIR SA INH 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 DZ1 has no effect on the direction of SOGECLAIR i.e., SOGECLAIR and BP PLC go up and down completely randomly.

Pair Corralation between SOGECLAIR and BP PLC

Assuming the 90 days horizon SOGECLAIR SA INH is expected to generate 1.06 times more return on investment than BP PLC. However, SOGECLAIR is 1.06 times more volatile than BP PLC DZ1. It trades about 0.03 of its potential returns per unit of risk. BP PLC DZ1 is currently generating about -0.04 per unit of risk. If you would invest  1,465  in SOGECLAIR SA INH on October 5, 2024 and sell it today you would earn a total of  245.00  from holding SOGECLAIR SA INH or generate 16.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SOGECLAIR SA INH  vs.  BP PLC DZ1

SOGECLAIR SA INH

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SOGECLAIR SA INH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SOGECLAIR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

BP PLC DZ1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BP PLC DZ1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SOGECLAIR and BP PLC

The main advantage of trading using opposite SOGECLAIR and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOGECLAIR 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 SOGECLAIR SA INH and BP PLC DZ1 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.