Correlation Between Armada Hflr and BP Plc

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

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

Diversification Opportunities for Armada Hflr and BP Plc

0.31

Correlation Coefficient

Armada Hflr  BP Plc

Weak diversification

The 3 months correlation between Armada and BSU is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Armada Hflr 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 Armada Hflr Pr 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 Armada Hflr i.e., Armada Hflr and BP Plc go up and down completely randomly.

Pair Corralation between Armada Hflr and BP Plc

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the BP Plc. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 1.26 times less risky than BP Plc. The stock trades about -0.08 of its potential returns per unit of risk. The BP plc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,811  in BP plc on September 15, 2024 and sell it today you would earn a total of  49.00  from holding BP plc or generate 1.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Armada Hflr Pr  vs.  BP plc

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

BP plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic 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 Armada Hflr and BP Plc

The main advantage of trading using opposite Armada Hflr and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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 Armada Hflr Pr 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.