Correlation Between Kingdee International and BP PLC

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

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

Diversification Opportunities for Kingdee International and BP PLC

0.21

Correlation Coefficient

Kingdee International  BP PLC

Modest diversification

The 3 months correlation between Kingdee and BPE is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software 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 Kingdee International 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 Kingdee International Software 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 Kingdee International i.e., Kingdee International and BP PLC go up and down completely randomly.

Pair Corralation between Kingdee International and BP PLC

Assuming the 90 days trading horizon Kingdee International Software is expected to under-perform the BP PLC. In addition to that, Kingdee International is 2.12 times more volatile than BP PLC DZ1. It trades about -0.02 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  540.00  in BP PLC DZ1 on October 10, 2024 and sell it today you would lose (54.00) from holding BP PLC DZ1 or give up 10.0% of portfolio value over 90 days.

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

Kingdee International Software  vs.  BP PLC DZ1

Kingdee International

Risk-Adjusted Performance

0 of 100

Very Weak

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

BP PLC DZ1

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP PLC DZ1 are ranked lower than 2 (%) 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 Kingdee International and BP PLC

The main advantage of trading using opposite Kingdee International and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingdee International 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 Kingdee International Software 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.

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.