Correlation Between INFORMATION SVC and BP Plc

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

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

Diversification Opportunities for INFORMATION SVC and BP Plc

-0.28

Correlation Coefficient

INFORMATION SVC  BP Plc

Very good diversification

The 3 months correlation between INFORMATION and BPE5 is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding INFORMATION SVC GRP and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and INFORMATION SVC 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 INFORMATION SVC GRP 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 INFORMATION SVC i.e., INFORMATION SVC and BP Plc go up and down completely randomly.

Pair Corralation between INFORMATION SVC and BP Plc

Assuming the 90 days horizon INFORMATION SVC GRP is expected to under-perform the BP Plc. In addition to that, INFORMATION SVC is 1.6 times more volatile than BP plc. It trades about -0.02 of its total potential returns per unit of risk. BP plc is currently generating about 0.0 per unit of volatility. If you would invest  501.00  in BP plc on September 12, 2024 and sell it today you would lose (25.00) from holding BP plc or give up 4.99% of portfolio value over 90 days.

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

INFORMATION SVC GRP  vs.  BP plc

INFORMATION SVC GRP

Risk-Adjusted Performance

12 of 100

Good

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

BP plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental 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 INFORMATION SVC and BP Plc

The main advantage of trading using opposite INFORMATION SVC and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INFORMATION SVC 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 INFORMATION SVC GRP 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.