Correlation Between Lion One and BP PLC

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

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

Diversification Opportunities for Lion One and BP PLC

0.46

Correlation Coefficient

Lion One  BP PLC

Very weak diversification

The 3 months correlation between Lion and BPE is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals 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 Lion One 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 Lion One Metals 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 Lion One i.e., Lion One and BP PLC go up and down completely randomly.

Pair Corralation between Lion One and BP PLC

Assuming the 90 days horizon Lion One Metals is expected to under-perform the BP PLC. In addition to that, Lion One is 1.76 times more volatile than BP PLC DZ1. It trades about -0.05 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  480.00  in BP PLC DZ1 on September 16, 2024 and sell it today you would lose (8.00) from holding BP PLC DZ1 or give up 1.67% of portfolio value over 90 days.

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

Lion One Metals  vs.  BP PLC DZ1

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Lion One and BP PLC

The main advantage of trading using opposite Lion One and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One 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 Lion One Metals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.