Correlation Between Sabre Insurance and BP Plc

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

By analyzing existing cross correlation between Sabre Insurance Group and BP plc, you can compare the effects of market volatilities on Sabre Insurance 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 Sabre Insurance with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabre Insurance and BP Plc.

Diversification Opportunities for Sabre Insurance and BP Plc

-0.26

Correlation Coefficient

Sabre Insurance  BP Plc

Very good diversification

The 3 months correlation between Sabre and BP-A is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Sabre Insurance 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 Sabre Insurance Group 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 has no effect on the direction of Sabre Insurance i.e., Sabre Insurance and BP Plc go up and down completely randomly.

Pair Corralation between Sabre Insurance and BP Plc

Assuming the 90 days trading horizon Sabre Insurance Group is expected to generate 2.51 times more return on investment than BP Plc. However, Sabre Insurance is 2.51 times more volatile than BP plc. It trades about -0.08 of its potential returns per unit of risk. BP plc is currently generating about -0.27 per unit of risk. If you would invest  13,880  in Sabre Insurance Group on October 25, 2024 and sell it today you would lose (280.00) from holding Sabre Insurance Group or give up 2.02% of portfolio value over 90 days.

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

Sabre Insurance Group  vs.  BP plc

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sabre Insurance is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

BP plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BP plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sabre Insurance and BP Plc

The main advantage of trading using opposite Sabre Insurance and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Insurance 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 Sabre Insurance Group and BP plc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.