Correlation Between Grupo Carso and BP Plc

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

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

Diversification Opportunities for Grupo Carso and BP Plc

0.37

Correlation Coefficient

Grupo Carso  BP Plc

Weak diversification

The 3 months correlation between Grupo and BSU is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Grupo Carso 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 Grupo Carso SAB 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 Grupo Carso i.e., Grupo Carso and BP Plc go up and down completely randomly.

Pair Corralation between Grupo Carso and BP Plc

Assuming the 90 days horizon Grupo Carso SAB is expected to under-perform the BP Plc. In addition to that, Grupo Carso is 1.08 times more volatile than BP plc. It trades about -0.02 of its total potential returns per unit of risk. BP plc is currently generating about 0.13 per unit of volatility. If you would invest  2,703  in BP plc on December 19, 2024 and sell it today you would earn a total of  377.00  from holding BP plc or generate 13.95% return on investment over 90 days.

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

Grupo Carso SAB  vs.  BP plc

Grupo Carso SAB

Risk-Adjusted Performance

Very Weak

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

BP plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BP Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Carso and BP Plc

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

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.