Correlation Between Polar Capital and BP Plc

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

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

Diversification Opportunities for Polar Capital and BP Plc

-0.65

Correlation Coefficient

Polar Capital  BP Plc

Excellent diversification

The 3 months correlation between Polar and BP-B is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Technology and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Polar Capital 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 Polar Capital Technology 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 Polar Capital i.e., Polar Capital and BP Plc go up and down completely randomly.

Pair Corralation between Polar Capital and BP Plc

Assuming the 90 days trading horizon Polar Capital Technology is expected to generate 0.74 times more return on investment than BP Plc. However, Polar Capital Technology is 1.35 times less risky than BP Plc. It trades about 0.21 of its potential returns per unit of risk. BP plc is currently generating about -0.02 per unit of risk. If you would invest  28,800  in Polar Capital Technology on September 12, 2024 and sell it today you would earn a total of  5,300  from holding Polar Capital Technology or generate 18.4% return on investment over 90 days.

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

Polar Capital Technology  vs.  BP plc

Polar Capital Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Polar Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

BP plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Polar Capital and BP Plc

The main advantage of trading using opposite Polar Capital and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polar Capital 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 Polar Capital Technology 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.