BP’s stock performance
In the previous part of this series, we looked into BP’s (BP) segment-wise outlook for 3Q16. In this part, we’ll look at BP’s stock performance before its 3Q16 results.
BP’s stock fell 31% from October 17, 2014, to January 20, 2016. Since then, the stock has recovered. The recovery was due to the firming crude oil prices as a result of global supply reductions and outages impacting the supply glut. BP is now down 14% since October 2014.
The shares of BP’s peers YPF (YPF) and ENI (E) fell 38% and 29%, respectively, since October 2014. PetroChina (PTR) fell 43% during the same period. The Vanguard High Dividend Yield ETF (VYM) has ~11% exposure to energy sector stocks.
BP’s stock correlation to crude oil and natural gas prices
BP’s stock shows a positive correlation to crude oil prices. The correlation coefficient of BP’s stock versus WTI (West Texas Intermediate) for the 12-month period stands at 0.65. The correlation coefficient shows the relationship between two variables. A correlation coefficient value of 0 to 1 shows a positive correlation, 0 states no correlation, and -1 to 0 shows an inverse correlation.
The value shows a strong correlation. It also means that on an average, 65% movement in BP’s stock price can be explained by changes in WTI prices. However, the correlation to natural gas is feeble, standing at 0.12.
The strength of the correlation is lower for BP’s peer ExxonMobil (XOM). The correlation of XOM versus WTI stands at 0.55. However, the other integrated energy players, Statoil (STO) and Suncor Energy (SU), show a higher correlation with WTI at 0.74 and 0.71, respectively.