Correlation Between AGNC INVESTMENT and BP Plc

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

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

Diversification Opportunities for AGNC INVESTMENT and BP Plc

0.59

Correlation Coefficient

AGNC INVESTMENT  BP Plc

Very weak diversification

The 3 months correlation between AGNC and BPE5 is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding AGNC INVESTMENT and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and AGNC INVESTMENT 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 AGNC INVESTMENT 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 AGNC INVESTMENT i.e., AGNC INVESTMENT and BP Plc go up and down completely randomly.

Pair Corralation between AGNC INVESTMENT and BP Plc

Assuming the 90 days trading horizon AGNC INVESTMENT is expected to generate 1.79 times less return on investment than BP Plc. But when comparing it to its historical volatility, AGNC INVESTMENT is 1.48 times less risky than BP Plc. It trades about 0.12 of its potential returns per unit of risk. BP plc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  476.00  in BP plc on October 9, 2024 and sell it today you would earn a total of  17.00  from holding BP plc or generate 3.57% return on investment over 90 days.

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

AGNC INVESTMENT  vs.  BP plc

AGNC INVESTMENT

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC INVESTMENT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AGNC INVESTMENT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BP plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, BP Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AGNC INVESTMENT and BP Plc

The main advantage of trading using opposite AGNC INVESTMENT and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC INVESTMENT 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 AGNC INVESTMENT 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.