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Is BP Ready for Lower Oil Prices?

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Part 17
Is BP Ready for Lower Oil Prices? PART 17 OF 17

What’s BP Correlation with WTI so Far in 3Q17?

BP’s correlation coefficient

In this series, we evaluated BP’s (BP) financial framework, major upstream projects, segmental earnings and outlook, leverage and liquidity position, analyst ratings, and its dividend expectation in 4Q17. We also assessed BP’s market performance, starting with its stock performance, moving averages, ten-day price forecast based on implied volatility, institutional ownership, short interest, valuations, and PEG (price-to-earnings-to-growth) ratio.

Now it’s time to examine the correlation between crude oil prices and BP’s stock price so far in 3Q17.

What&#8217;s BP Correlation with WTI so Far in 3Q17?

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A correlation coefficient estimates the relationship between two variables. A value between zero and one symbolizes a positive correlation. However, a value between minus one and zero shows a negative correlation. For this estimate, we’ve considered the price history over the past 12 months and the past forty days of both BP and WTI (West Texas Intermediate).

Correlation of BP stock with WTI

Over the past year, the correlation coefficient of BP with WTI comes in at 0.57, which shows that BP’s stock prices have changed in line with WTI prices—to some degree. This figure means that changes in WTI can explain ~57% of the changes in BP’s stock prices over the past year.

But this figure has fallen to 28% in 3Q17 so far, indicating a weakening correlation.

Peer correlations

ExxonMobil (XOM) has also witnessed a fall in its correlation with WTI prices in 3Q17. XOM’s correlation with WTI is at 0.43 so far in 3Q17, compared with 0.49 over the past year.

By contrast, Suncor Energy (SU), Total (TOT), ENI (E), and Petrobras (PBR) have seen rises in their correlations—by 0.07, 0.18, 0.09, and 0.06, respectively, in so far in 3Q17. SU, TOT, E, and PBR are looking at 3Q17 correlations with WTI of 0.75, 0.71, 0.56, and 0.58 so far in 3Q17.

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