Correlation Between CLEAN ENERGY and BP PLC

Can any of the company-specific risk be diversified away by investing in both CLEAN 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 CLEAN 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 CLEAN ENERGY FUELS and BP PLC DZ1, you can compare the effects of market volatilities on CLEAN 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 CLEAN ENERGY with a short position of BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CLEAN ENERGY and BP PLC.

Diversification Opportunities for CLEAN ENERGY and BP PLC

0.2

Correlation Coefficient

CLEAN ENERGY  BP PLC

Modest diversification

The 3 months correlation between CLEAN and BPE is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CLEAN ENERGY FUELS 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 CLEAN 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 CLEAN ENERGY FUELS 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 CLEAN ENERGY i.e., CLEAN ENERGY and BP PLC go up and down completely randomly.

Pair Corralation between CLEAN ENERGY and BP PLC

Assuming the 90 days trading horizon CLEAN ENERGY FUELS is expected to generate 1.29 times more return on investment than BP PLC. However, CLEAN ENERGY is 1.29 times more volatile than BP PLC DZ1. It trades about 0.05 of its potential returns per unit of risk. BP PLC DZ1 is currently generating about 0.02 per unit of risk. If you would invest  255.00  in CLEAN ENERGY FUELS on October 24, 2024 and sell it today you would earn a total of  20.00  from holding CLEAN ENERGY FUELS or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

CLEAN ENERGY FUELS  vs.  BP PLC DZ1

CLEAN ENERGY FUELS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CLEAN ENERGY FUELS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CLEAN ENERGY may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BP PLC DZ1

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP PLC DZ1 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BP PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CLEAN ENERGY and BP PLC

The main advantage of trading using opposite CLEAN ENERGY and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CLEAN 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 CLEAN ENERGY FUELS 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.