Correlation Between SILVER BULLET and BP Plc

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

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

Diversification Opportunities for SILVER BULLET and BP Plc

-0.15

Correlation Coefficient

SILVER BULLET  BP Plc

Good diversification

The 3 months correlation between SILVER and BPE5 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SILVER BULLET DATA and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and SILVER BULLET 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 SILVER BULLET DATA 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 SILVER BULLET i.e., SILVER BULLET and BP Plc go up and down completely randomly.

Pair Corralation between SILVER BULLET and BP Plc

Assuming the 90 days horizon SILVER BULLET DATA is expected to generate 3.72 times more return on investment than BP Plc. However, SILVER BULLET is 3.72 times more volatile than BP plc. It trades about 0.03 of its potential returns per unit of risk. BP plc is currently generating about 0.01 per unit of risk. If you would invest  77.00  in SILVER BULLET DATA on October 10, 2024 and sell it today you would lose (6.00) from holding SILVER BULLET DATA or give up 7.79% of portfolio value over 90 days.

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

SILVER BULLET DATA  vs.  BP plc

SILVER BULLET DATA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SILVER BULLET DATA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SILVER BULLET reported solid returns over the last few months and may actually be approaching a breakup point.

BP plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 4 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SILVER BULLET and BP Plc

The main advantage of trading using opposite SILVER BULLET and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SILVER BULLET 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 SILVER BULLET DATA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.