Correlation Between FEMALE HEALTH and BP PLC

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

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

Diversification Opportunities for FEMALE HEALTH and BP PLC

0.64

Correlation Coefficient

FEMALE HEALTH  BP PLC

Poor diversification

The 3 months correlation between FEMALE and BPE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding FEMALE HEALTH 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 FEMALE HEALTH 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 FEMALE HEALTH 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 FEMALE HEALTH i.e., FEMALE HEALTH and BP PLC go up and down completely randomly.

Pair Corralation between FEMALE HEALTH and BP PLC

Assuming the 90 days trading horizon FEMALE HEALTH is expected to under-perform the BP PLC. In addition to that, FEMALE HEALTH is 3.34 times more volatile than BP PLC DZ1. It trades about -0.04 of its total potential returns per unit of risk. BP PLC DZ1 is currently generating about 0.0 per unit of volatility. If you would invest  546.00  in BP PLC DZ1 on October 9, 2024 and sell it today you would lose (60.00) from holding BP PLC DZ1 or give up 10.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

FEMALE HEALTH  vs.  BP PLC DZ1

FEMALE HEALTH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEMALE HEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FEMALE HEALTH is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

BP PLC DZ1

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP PLC DZ1 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 FEMALE HEALTH and BP PLC

The main advantage of trading using opposite FEMALE HEALTH and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FEMALE HEALTH 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 FEMALE HEALTH 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.