Correlation Between S E and BP PLC

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

By analyzing existing cross correlation between S E BANKEN A and BP PLC DZ1, you can compare the effects of market volatilities on S E 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 S E with a short position of BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of S E and BP PLC.

Diversification Opportunities for S E and BP PLC

0.12

Correlation Coefficient

S E  BP PLC

Average diversification

The 3 months correlation between SEBA and BPE is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding S E BANKEN A 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 S E 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 S E BANKEN A 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 S E i.e., S E and BP PLC go up and down completely randomly.

Pair Corralation between S E and BP PLC

Assuming the 90 days trading horizon S E is expected to generate 24.61 times less return on investment than BP PLC. But when comparing it to its historical volatility, S E BANKEN A is 27.22 times less risky than BP PLC. It trades about 0.15 of its potential returns per unit of risk. BP PLC DZ1 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  689.00  in BP PLC DZ1 on April 24, 2025 and sell it today you would earn a total of  77.00  from holding BP PLC DZ1 or generate 11.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

S E BANKEN A   vs.  BP PLC DZ1

S E BANKEN

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in S E BANKEN A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, S E may actually be approaching a critical reversion point that can send shares even higher in August 2025.

BP PLC DZ1

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BP PLC DZ1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BP PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with S E and BP PLC

The main advantage of trading using opposite S E and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S E 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 S E BANKEN A 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.