Correlation Between BP Plc and Origin Energy
Can any of the company-specific risk be diversified away by investing in both BP Plc and Origin Energy 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 Origin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP plc and Origin Energy Ltd, you can compare the effects of market volatilities on BP Plc and Origin Energy 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 Origin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and Origin Energy.
Diversification Opportunities for BP Plc and Origin Energy
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BPAQF and Origin is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and Origin Energy Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Energy 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 Origin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Energy has no effect on the direction of BP Plc i.e., BP Plc and Origin Energy go up and down completely randomly.
Pair Corralation between BP Plc and Origin Energy
Assuming the 90 days horizon BP plc is expected to generate 0.91 times more return on investment than Origin Energy. However, BP plc is 1.1 times less risky than Origin Energy. It trades about 0.16 of its potential returns per unit of risk. Origin Energy Ltd is currently generating about -0.02 per unit of risk. If you would invest 477.00 in BP plc on December 28, 2024 and sell it today you would earn a total of 93.00 from holding BP plc or generate 19.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
BP plc vs. Origin Energy Ltd
Performance |
Timeline |
BP plc |
Origin Energy |
BP Plc and Origin Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BP Plc and Origin Energy
The main advantage of trading using opposite BP Plc and Origin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc position performs unexpectedly, Origin Energy 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 Origin Energy will offset losses from the drop in Origin Energy's long position.BP Plc vs. Unit Corporation | BP Plc vs. Galp Energa | BP Plc vs. Ecopetrol SA ADR | BP Plc vs. Equinor ASA ADR |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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