Correlation Between BP PLC and Transportadora

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

By analyzing existing cross correlation between BP PLC DZ1 and Transportadora de Gas, you can compare the effects of market volatilities on BP PLC and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and Transportadora.

Diversification Opportunities for BP PLC and Transportadora

-0.42

Correlation Coefficient

BP PLC  Transportadora

Very good diversification

The 3 months correlation between BPE and Transportadora is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC DZ1 and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 DZ1 are associated (or correlated) with Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of BP PLC i.e., BP PLC and Transportadora go up and down completely randomly.

Pair Corralation between BP PLC and Transportadora

Assuming the 90 days horizon BP PLC DZ1 is expected to generate 0.5 times more return on investment than Transportadora. However, BP PLC DZ1 is 2.01 times less risky than Transportadora. It trades about 0.11 of its potential returns per unit of risk. Transportadora de Gas is currently generating about -0.04 per unit of risk. If you would invest  453.00  in BP PLC DZ1 on December 5, 2024 and sell it today you would earn a total of  67.00  from holding BP PLC DZ1 or generate 14.79% 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 DZ1  vs.  Transportadora de Gas

BP PLC DZ1

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BP PLC DZ1 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BP PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Transportadora de Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transportadora de Gas has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BP PLC and Transportadora

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

The idea behind BP PLC DZ1 and Transportadora de Gas 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 Commodity Directory module to find actively traded commodities issued by global exchanges.