Correlation Between Pembina Pipeline and BP PLC

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

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

Diversification Opportunities for Pembina Pipeline and BP PLC

-0.22

Correlation Coefficient

Pembina Pipeline  BP PLC

Very good diversification

The 3 months correlation between Pembina and BPE is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp 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 Pembina Pipeline 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 Pembina Pipeline Corp 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 Pembina Pipeline i.e., Pembina Pipeline and BP PLC go up and down completely randomly.

Pair Corralation between Pembina Pipeline and BP PLC

Assuming the 90 days horizon Pembina Pipeline is expected to generate 2.6 times less return on investment than BP PLC. But when comparing it to its historical volatility, Pembina Pipeline Corp is 3.1 times less risky than BP PLC. It trades about 0.23 of its potential returns per unit of risk. BP PLC DZ1 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  442.00  in BP PLC DZ1 on October 24, 2024 and sell it today you would earn a total of  50.00  from holding BP PLC DZ1 or generate 11.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Pembina Pipeline Corp  vs.  BP PLC DZ1

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pembina Pipeline and BP PLC

The main advantage of trading using opposite Pembina Pipeline and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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 Pembina Pipeline Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..