Correlation Between Aker BP and Woodside Energy

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

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

Diversification Opportunities for Aker BP and Woodside Energy

0.0

Correlation Coefficient

Aker BP  Woodside Energy

Pay attention - limited upside

The 3 months correlation between Aker and Woodside is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Woodside Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Energy Group and Aker BP 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 Aker BP ASA are associated (or correlated) with Woodside Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Energy Group has no effect on the direction of Aker BP i.e., Aker BP and Woodside Energy go up and down completely randomly.

Pair Corralation between Aker BP and Woodside Energy

Assuming the 90 days horizon Aker BP ASA is expected to generate 3.01 times more return on investment than Woodside Energy. However, Aker BP is 3.01 times more volatile than Woodside Energy Group. It trades about 0.02 of its potential returns per unit of risk. Woodside Energy Group is currently generating about -0.05 per unit of risk. If you would invest  1,063  in Aker BP ASA on September 17, 2024 and sell it today you would lose (48.00) from holding Aker BP ASA or give up 4.52% of portfolio value over 90 days.

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

Aker BP ASA  vs.  Woodside Energy Group

Aker BP ASA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aker BP ASA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Aker BP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Woodside Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aker BP and Woodside Energy

The main advantage of trading using opposite Aker BP and Woodside Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker BP position performs unexpectedly, Woodside Energy 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 Woodside Energy will offset losses from the drop in Woodside Energy's long position.

The idea behind Aker BP ASA and Woodside Energy Group 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.