Correlation Between AMP and BHP Group
Can any of the company-specific risk be diversified away by investing in both AMP 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 AMP and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMP and BHP Group Limited, you can compare the effects of market volatilities on AMP 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 AMP with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMP and BHP Group.
Diversification Opportunities for AMP and BHP Group
Significant diversification
The 3 months correlation between AMP and BHP is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding AMP 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 AMP 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 AMP 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 AMP i.e., AMP and BHP Group go up and down completely randomly.
Pair Corralation between AMP and BHP Group
Assuming the 90 days trading horizon AMP is expected to generate 1.66 times more return on investment than BHP Group. However, AMP is 1.66 times more volatile than BHP Group Limited. It trades about 0.03 of its potential returns per unit of risk. BHP Group Limited is currently generating about 0.0 per unit of risk. If you would invest 125.00 in AMP on September 2, 2024 and sell it today you would earn a total of 31.00 from holding AMP or generate 24.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AMP vs. BHP Group Limited
Performance |
| Timeline |
| AMP |
| BHP Group Limited |
AMP and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AMP and BHP Group
The main advantage of trading using opposite AMP and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMP 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.| AMP vs. Wt Financial Group | AMP vs. Perpetual Credit Income | AMP vs. Bank of Queensland | AMP vs. Srj Technologies Group |
| BHP Group vs. Charter Hall Education | BHP Group vs. Ainsworth Game Technology | BHP Group vs. RLF AgTech | BHP Group vs. Stelar Metals |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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