Correlation Between SECURITAS and BP PLC

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

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

Diversification Opportunities for SECURITAS and BP PLC

-0.01

Correlation Coefficient

SECURITAS  BP PLC

Good diversification

The 3 months correlation between SECURITAS and BPE is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding SECURITAS B 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 SECURITAS 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 SECURITAS B 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 SECURITAS i.e., SECURITAS and BP PLC go up and down completely randomly.

Pair Corralation between SECURITAS and BP PLC

Assuming the 90 days trading horizon SECURITAS B is expected to under-perform the BP PLC. But the stock apears to be less risky and, when comparing its historical volatility, SECURITAS B is 4.69 times less risky than BP PLC. The stock trades about -0.05 of its potential returns per unit of risk. The BP PLC DZ1 is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  442.00  in BP PLC DZ1 on October 22, 2024 and sell it today you would earn a total of  66.00  from holding BP PLC DZ1 or generate 14.93% return on investment over 90 days.

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

SECURITAS B   vs.  BP PLC DZ1

SECURITAS B

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SECURITAS B are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SECURITAS unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 fragile basic indicators, BP PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SECURITAS and BP PLC

The main advantage of trading using opposite SECURITAS and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SECURITAS 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 SECURITAS B 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.