Correlation Between Savoy Energy and BP PLC

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

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

Diversification Opportunities for Savoy Energy and BP PLC

0.0

Correlation Coefficient

Savoy Energy  BP PLC

Pay attention - limited upside

The 3 months correlation between Savoy and BP PLC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Savoy Energy Corp and BP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC ADR and Savoy Energy 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 Savoy Energy 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 ADR has no effect on the direction of Savoy Energy i.e., Savoy Energy and BP PLC go up and down completely randomly.

Pair Corralation between Savoy Energy and BP PLC

If you would invest  2,868  in BP PLC ADR on December 17, 2024 and sell it today you would earn a total of  508.00  from holding BP PLC ADR or generate 17.71% return on investment over 90 days.

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

Savoy Energy Corp  vs.  BP PLC ADR

Savoy Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Savoy Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Savoy Energy is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

BP PLC ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BP PLC ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, BP PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Savoy Energy and BP PLC

The main advantage of trading using opposite Savoy Energy and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Savoy Energy 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 Savoy Energy Corp and BP PLC ADR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.