Correlation Between Woodside Energy and Aker BP

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

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

Diversification Opportunities for Woodside Energy and Aker BP

0.0

Correlation Coefficient

Woodside Energy  Aker BP

Pay attention - limited upside

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

Pair Corralation between Woodside Energy and Aker BP

Considering the 90-day investment horizon Woodside Energy Group is expected to under-perform the Aker BP. But the stock apears to be less risky and, when comparing its historical volatility, Woodside Energy Group is 3.01 times less risky than Aker BP. The stock trades about -0.05 of its potential returns per unit of risk. The Aker BP ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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

Woodside Energy Group  vs.  Aker BP ASA

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.

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.

Pair Trading with Woodside Energy and Aker BP

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

The idea behind Woodside Energy Group and Aker BP ASA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.