Correlation Between BP Plc and SILVER BULLET

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

By analyzing existing cross correlation between BP plc and SILVER BULLET DATA, you can compare the effects of market volatilities on BP Plc and SILVER BULLET 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 SILVER BULLET. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and SILVER BULLET.

Diversification Opportunities for BP Plc and SILVER BULLET

-0.27

Correlation Coefficient

BP Plc  SILVER BULLET

Very good diversification

The 3 months correlation between BPE5 and SILVER is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and SILVER BULLET DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILVER BULLET DATA 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 SILVER BULLET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILVER BULLET DATA has no effect on the direction of BP Plc i.e., BP Plc and SILVER BULLET go up and down completely randomly.

Pair Corralation between BP Plc and SILVER BULLET

Assuming the 90 days trading horizon BP plc is expected to generate 0.65 times more return on investment than SILVER BULLET. However, BP plc is 1.53 times less risky than SILVER BULLET. It trades about 0.14 of its potential returns per unit of risk. SILVER BULLET DATA is currently generating about -0.26 per unit of risk. If you would invest  450.00  in BP plc on December 20, 2024 and sell it today you would earn a total of  64.00  from holding BP plc or generate 14.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BP plc  vs.  SILVER BULLET DATA

BP plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, BP Plc reported solid returns over the last few months and may actually be approaching a breakup point.

SILVER BULLET DATA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SILVER BULLET DATA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators 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 SILVER BULLET

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

The idea behind BP plc and SILVER BULLET DATA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.