Correlation Between BP Plc and BP PLC

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

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

Diversification Opportunities for BP Plc and BP PLC

0.82

Correlation Coefficient

BP Plc  BP PLC

Very poor diversification

The 3 months correlation between BSU and BPE is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and BP PLC DZ1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC DZ1 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 BP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP PLC DZ1 has no effect on the direction of BP Plc i.e., BP Plc and BP PLC go up and down completely randomly.

Pair Corralation between BP Plc and BP PLC

Assuming the 90 days trading horizon BP Plc is expected to generate 1.88 times less return on investment than BP PLC. But when comparing it to its historical volatility, BP plc is 1.67 times less risky than BP PLC. It trades about 0.11 of its potential returns per unit of risk. BP PLC DZ1 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  448.00  in BP PLC DZ1 on September 16, 2024 and sell it today you would earn a total of  24.00  from holding BP PLC DZ1 or generate 5.36% return on investment over 90 days.

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

BP plc  vs.  BP PLC DZ1

BP plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BP plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BP Plc is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BP PLC DZ1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BP PLC DZ1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BP PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BP Plc and BP PLC

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

The idea behind BP plc and BP PLC DZ1 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.