Correlation Between BP Plc and Allianz Technology

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

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

Diversification Opportunities for BP Plc and Allianz Technology

-0.67

Correlation Coefficient

BP Plc  Allianz Technology

Excellent diversification

The 3 months correlation between BP-A and Allianz is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and Allianz Technology Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz Technology Trust and BP Plc 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 BP plc are associated (or correlated) with Allianz Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz Technology Trust has no effect on the direction of BP Plc i.e., BP Plc and Allianz Technology go up and down completely randomly.

Pair Corralation between BP Plc and Allianz Technology

Assuming the 90 days trading horizon BP plc is expected to generate 0.37 times more return on investment than Allianz Technology. However, BP plc is 2.74 times less risky than Allianz Technology. It trades about 0.04 of its potential returns per unit of risk. Allianz Technology Trust is currently generating about -0.08 per unit of risk. If you would invest  13,846  in BP plc on December 21, 2024 and sell it today you would earn a total of  254.00  from holding BP plc or generate 1.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

BP plc  vs.  Allianz Technology Trust

BP plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BP Plc is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Allianz Technology Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allianz Technology Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with BP Plc and Allianz Technology

The main advantage of trading using opposite BP Plc and Allianz Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc position performs unexpectedly, Allianz Technology 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 Allianz Technology will offset losses from the drop in Allianz Technology's long position.

The idea behind BP plc and Allianz Technology Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.