Correlation Between Major Drilling and BHP Group
Can any of the company-specific risk be diversified away by investing in both Major Drilling and BHP Group 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 Major Drilling and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Major Drilling Group and BHP Group Limited, you can compare the effects of market volatilities on Major Drilling and BHP Group 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 Major Drilling with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and BHP Group.
Diversification Opportunities for Major Drilling and BHP Group
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Major and BHP is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited and Major Drilling 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 Major Drilling Group are associated (or correlated) with BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Major Drilling i.e., Major Drilling and BHP Group go up and down completely randomly.
Pair Corralation between Major Drilling and BHP Group
Assuming the 90 days horizon Major Drilling Group is expected to under-perform the BHP Group. In addition to that, Major Drilling is 1.42 times more volatile than BHP Group Limited. It trades about 0.0 of its total potential returns per unit of risk. BHP Group Limited is currently generating about 0.01 per unit of volatility. If you would invest 2,485 in BHP Group Limited on August 25, 2024 and sell it today you would lose (35.00) from holding BHP Group Limited or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. BHP Group Limited
Performance |
| Timeline |
| Major Drilling Group |
| BHP Group Limited |
Major Drilling and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and BHP Group
The main advantage of trading using opposite Major Drilling and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.| Major Drilling vs. NTG Nordic Transport | Major Drilling vs. TYSON FOODS A | Major Drilling vs. SENECA FOODS A | Major Drilling vs. Gaztransport Technigaz SA |
| BHP Group vs. BOS BETTER ONLINE | BHP Group vs. Southwest Airlines Co | BHP Group vs. Tsingtao Brewery | BHP Group vs. American Airlines Group |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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