Correlation Between Cleanaway Waste and BP Plc

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

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

Diversification Opportunities for Cleanaway Waste and BP Plc

-0.13

Correlation Coefficient

Cleanaway Waste  BP Plc

Good diversification

The 3 months correlation between Cleanaway and BPE5 is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cleanaway Waste Management and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Cleanaway Waste 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 Cleanaway Waste Management 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 Cleanaway Waste i.e., Cleanaway Waste and BP Plc go up and down completely randomly.

Pair Corralation between Cleanaway Waste and BP Plc

Assuming the 90 days trading horizon Cleanaway Waste Management is expected to under-perform the BP Plc. In addition to that, Cleanaway Waste is 1.49 times more volatile than BP plc. It trades about -0.06 of its total potential returns per unit of risk. BP plc is currently generating about 0.16 per unit of volatility. If you would invest  454.00  in BP plc on December 21, 2024 and sell it today you would earn a total of  75.00  from holding BP plc or generate 16.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Cleanaway Waste Management  vs.  BP plc

Cleanaway Waste Mana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cleanaway Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BP plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, BP Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cleanaway Waste and BP Plc

The main advantage of trading using opposite Cleanaway Waste and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cleanaway Waste 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 Cleanaway Waste Management 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.