Correlation Between BP PLC and B Riley

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

By analyzing existing cross correlation between BP PLC ADR and B Riley Financial,, you can compare the effects of market volatilities on BP PLC and B Riley 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 B Riley. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and B Riley.

Diversification Opportunities for BP PLC and B Riley

0.71

Correlation Coefficient

BP PLC  B Riley

Poor diversification

The 3 months correlation between BP PLC and RILYM is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC ADR and B Riley Financial, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial, 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 ADR are associated (or correlated) with B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial, has no effect on the direction of BP PLC i.e., BP PLC and B Riley go up and down completely randomly.

Pair Corralation between BP PLC and B Riley

Allowing for the 90-day total investment horizon BP PLC ADR is expected to generate 1.57 times more return on investment than B Riley. However, BP PLC is 1.57 times more volatile than B Riley Financial,. It trades about 0.21 of its potential returns per unit of risk. B Riley Financial, is currently generating about 0.3 per unit of risk. If you would invest  2,869  in BP PLC ADR on December 28, 2024 and sell it today you would earn a total of  572.00  from holding BP PLC ADR or generate 19.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.33%
Values	Daily Returns

BP PLC ADR  vs.  B Riley Financial,

BP PLC ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BP PLC ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, BP PLC reported solid returns over the last few months and may actually be approaching a breakup point.

B Riley Financial,

Risk-Adjusted Performance

Solid

Over the last 90 days B Riley Financial, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, B Riley displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BP PLC and B Riley

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

The idea behind BP PLC ADR and B Riley Financial, 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.