Correlation Between Shenandoah Telecommunicatio and BP PLC

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

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

Diversification Opportunities for Shenandoah Telecommunicatio and BP PLC

-0.01

Correlation Coefficient

Shenandoah Telecommunicatio  BP PLC

Good diversification

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

Pair Corralation between Shenandoah Telecommunicatio and BP PLC

Assuming the 90 days horizon Shenandoah Telecommunications is expected to under-perform the BP PLC. In addition to that, Shenandoah Telecommunicatio is 1.38 times more volatile than BP PLC DZ1. It trades about -0.07 of its total potential returns per unit of risk. BP PLC DZ1 is currently generating about -0.06 per unit of volatility. If you would invest  460.00  in BP PLC DZ1 on October 5, 2024 and sell it today you would lose (9.00) from holding BP PLC DZ1 or give up 1.96% of portfolio value over 90 days.

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

Shenandoah Telecommunications  vs.  BP PLC DZ1

Shenandoah Telecommunicatio

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Shenandoah Telecommunications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Shenandoah Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest weak 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.

Pair Trading with Shenandoah Telecommunicatio and BP PLC

The main advantage of trading using opposite Shenandoah Telecommunicatio and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenandoah Telecommunicatio 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 Shenandoah Telecommunications 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.